2. rates of obesity and diabetes are leaving she had never considered buying surgeon—but one can still work at other
workers disabled at younger ages than in disability insurance until she was offered jobs, such as a general practitioner.
the recent past. Cancer was the No. 1 it at work. “I never checked into it. I Affordable Option
cause of long-term disability last year at didn’t know the benefits of it until we
the largest disability insurer, UnumProvi- Guaranteed-renewable policies tend to
received it here,” she says.
dent, the company says. Other top causes have fewer features, but their lower
Karen Morse, director of employee
include complications of pregnancy, cost—an average of 20% less than
benefits at ING Groep in New York, says noncancelable—makes them more afford-
musculoskeletal diseases, back injuries the financial-services company started able. As long as the premium is paid, the
and heart disease. offering supplemental disability insurance insurer can’t drop the policy. But rates on
Lack of Coverage from MassMutual at a 25% discount in guaranteed-renewable policies can be
Despite the growing risks, less than a addition to its long-term employer-paid increased, subject to approval by state
third of all workers in private industry group coverage nearly six years ago. The regulators.
have long-term disability insurance, and employer-paid plan simply didn’t cover Rates for newly issued policies of both
only 40% of managerial and professional enough of the highly compensated execu- types of policies for 35-year-old males
workers do, according to the Bureau of tives’ salaries, Ms. Morse says. have been rising at about 7% a year,
Labor Statistics. according to Gregory Large, managing
Taxable Benefits partner of Lenox Advisors Inc., a benefits
As recognition of the coverage gap
To be sure, most people in the U.S. who broker and administrator based in New
grows, some people are buying policies to
supplement an employer-paid benefit— do have disability coverage get it from York.
say, to increase the income replacement their employers as a benefit. Group Individual policies of all types often
or cover short-term loss if the employer coverage has the advantage of being often include the option to buy inflation-protec-
pays for only long-term. But many buy it free to employees and guaranteed: No tion and other riders. And a growing
because they otherwise have no coverage. medical questions are asked and you number of insurers also offer policies and
can’t be disqualified. But benefits are riders that make up for lost retirement-
Five states (New York, New Jersey,
often limited to 50%-60% of income and account contributions during disability,
Rhode Island, California and Hawaii) and
may be capped at $5,000-$10,000 a month, including Berkshire Life Insurance Co. of
Puerto Rico mandate that employers
among other limitations. Benefits are America’s Retirement Protection Plus
provide some short-term disability cov- and MassMutual’s RetireGuard (though
erage, or provide it through a state-fund- taxable when the employer pays the
some group plans do, too).
ed program. premium. Group policies also aren’t port-
Elizabeth Vaughn, 53, a cardiovascular able; you usually have to leave insurance Legal Protections
scrub nurse at Freeman West Hospital in behind with the job. Consmer advocates warn that legal
Joplin, Mo., signed up for a short-term With private, individual policies, bene- protections for consumers who buy some
disability policy with $40-a-month payroll fits aren’t taxable if you pay your own individual disability insurance products at
deductions to cover 60% of her income this premium. And policies are portable if you work can be unclear.
spring. Her employer has offered change employers. Private policies sold in Insurance watchdog Joseph Belth,
discounted short-term disability from the workplace may even share some char- professor emeritus at Indiana University
UnumProvident since November 2004. In acteristics of group policies, such as not of Bloomington, has criticized some
August, she underwent a knee-replace- insurers for invoking the Employment
requiring medical testing.
ment surgery. During a 12-week leave of Retirement Income Security Act, a
Among individual policies, noncance- federal law that regulates benefits plans,
absence, she received nearly $5,000 in lable insurance is often marketed to high-
disability benefits. to avoid lawsuits by disgruntled claimants
income executives and professionals. It Erisa was intended to protect em-
Buying on the Job tends to have generous features such as ployees’ retirement benefits, but has
Four years ago, when she had the same desirable “own occupation” definitions of sometimes been interpreted by the courts
operation on her other knee, she borrowed disability that pay a full benefit if one is in ways that favor employers and in-
money from her retirement plan to live on unable to perform the specialized duties surers defending against claimant
while she recovered. Ms. Vaughn says of one’s occupation—say, those of a lawsuits.
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