Illness Impacts Family Finances Without Disability Insurance

A new survey from MetLife reveals that nearly 60 percent of Americans have $5,000, or less, in personal savings available for use in the event of a major illness. Even more ominous, nearly half would have to borrow against retirement savings, or secure a line of credit on their home, if they needed access to between $10,000 and $35,000 to cover expenses related a major illness. One in four Americans, or 26 percent, say they “do not know” where they could get that kind of money.


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Despite the lack of savings, the Critical Illness Financial Impact indicates that 57 percent of those surveyed do not have disability income insurance, either through their employer or purchased individually. Even among those who have disability insurance, 51 percent don’t know what kind of benefit they would collect in the event of a disability.

“With many Americans living paycheck to paycheck, some are not aware or prepared for the financial impact should they experience a major illness. Thanks to medical breakthroughs individuals can be optimistic about surviving these illnesses, but they must be realistic that survival can present financial challenges depending upon their life stage,” Randy Stram, MetLife vice president, Critical Illness Insurance.

ProtectYourIncome.com, an online resource for disability insurance for professionals, offers additional statistics about disability insurance, including:

  • “Someone who is 35 years old has a 50 percent chance of disability for 90 days or more before they turn 65.”
  • “Upwards of 375,000 Americans become totally disabled every year.”
  • “About 110 million Americans do not have long term disability insurance.”
  • “46 percent of all foreclosures on conventional mortgages are brought about by a disability. Approximately 2 percent are caused by the death of the homeowner.”

The federal government offers disability and Supplemental Security Income (SSI) to individuals unable to work for health reasons. ProtectYourIncome.com reports that the Social Security Disability Insurance Program pays $722 per month, on average. Social Security Online, the official web site of the U.S. Social Security Administration, offers three calculators individuals can use to determine what their benefits are likely to be if they qualify for the Social Security Disability Program. In addition, the Benefit Eligibility Screening Tool (BEST), available online at http://best.ssa.gov, can help individuals determine whether they are eligible for any of the benefits programs administered by the Social Security Administration. ProtectYourIncome.com reports that only about 35 percent of individuals applying for federal benefits actually qualifies for them.

MetLife also introduced, in October, a new disability insurance product for smaller employers. The new contract provides employers having fewer than 500 employees increased plan flexibility and employee benefits options, including return-to-work/stay-at-work strategies.

“The financial burdens related to a critical illness often outlast the treatment and recovery period,” Randy Stram says in a prepared statement about the MetLife survey. “The Critical Illness Financial Impact survey emphasizes the need for increasing consumer awareness about the potential gap in financial protection that some individuals may face in the event of a major illness.”

Many people think of major illnesses as those requiring hospitalization. Many do. Hospitalization, however, is only part of the cost of recovery. Many individuals find themselves temporarily placed in nursing homes or needing the in-home services of a private nurse, therapist or other health aide.

The Westchester County Business Journal reports that another MetLife survey, the annual Market Survey of Nursing Home and Home Care Costs, found that the average cost of a day in a nursing home in the U.S. is $203. For those individuals needing help at home, the cost of a home health aide averages $19 per hour. A third MetLife survey, the Market Survey of Assisted Living Costs, found that the average base cost of assisted living facilities rose to $2,905 a month this year.

No one can say how long a major illness will last. ProtectYourIncome.com provides these estimates of the average length of long-term disability (lasting more than 90 days) based on age:

  • At 25, disability lasts 2 years, 2 months
  • At 30, that increases to 2 years, 8 months
  • At 35, long-term disability is 3 years, 1 month
  • At 40, it reaches 3.5 years
  • At 45, you’ll be out 3 years, 11 months
  • At 50, it increases to 4 years, 2 months and
  • At 55, disability lasts 4 years and 5 months.

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