Small Biz Underestimates Serious Disability Threat

February 11, 2003 ( - Small employers underestimate the risk that an employee between the ages of 35 and 65 will suffer a serious disability.

Nearly half (42%) of the respondents who do not currently have disability coverage believe the likelihood of a worker between the ages of 35 and 65 suffering a serious disability to be one in 50. The actual likelihood is one in three, a figure correctly identified by only 10% of survey respondents, as found in the recent study by the American Council of Life Insurers (ACLI), Disability Income Insurance: Penetrating the Small- Employer Market.

Surprisingly, those employers that currently have disability coverage had similar estimates.   Those with disability coverage estimated the likelihood of serious injury to be one in 50 (42%), with only 10% choosing the correct one in three figure.  

The 266 employers offering the coverage do so through a variety of different coverage levels.   Fifty-eight percent offer both short and long-term coverage, 53% only provide group coverage and 46% provide full premium for disability coverage.   ACLI found employers cite as reasons for offering disability coverage:

  • Improved employee attitudes and performance (74%)
  • Helps with employee recruitment and retention (67%)
  • Covering key employees is necessary to protect business (55%)
  • Having one or more employers with a prior disability event (45%).

Have Nots

The study revealed the 215 small employers not offering disability income insurance said that they would be more likely to offer coverage should a worker become disabled (42%). However, many believe that the coverage is too expensive (77%), that their business activities do not present a high enough disability risk to warrant coverage (58%), or that the coverage is simply not necessary to gain or retain workers (57%).

Just over half of small employers are at least somewhat more likely to consider offering disability coverage if it can be shown that the insurance is affordable (55%) or would benefit their business directly by improving productivity (51%).   Additionally, 50% would be interested in hearing more if coverage was shown to reduce the chance of litigation.   However, the largest portions of the group are backward looking, as 56% would be somewhat more likely to consider offering the coverage if a worker experienced a serious disability.

Following in the path of the have nots, the vast majority (84%) have never offered coverage.   Of the remaining that have since dropped the coverage, employers’ reasons include loss of employee interest, coverage was too costly, benefits package containing the coverage was dropped, lack of use and the carrier discontinued service.

Other Benefits As Well

Offering disability coverage translates well for employees in relation to other benefit offerings.    The survey found, of those offering the coverage, other benefit offerings included:

  • 99% paid vacation
  • 98% health insurance
  • 89% pension or payment plan
  • 72% paid sick leave.  

The ACLI is a Washington, DC-based trade association of 383 member companies. To access the full report online, go to ACLI’s Web site .