Disability: What you don't know CAN hurt you

The average mother rushes through the day, juggling children, work or school while focused on the busy day ahead. Few ever think that one day, suddenly, their life may be changed forever by a sudden, unexpected disability. Yet, the U.S. Social Security Administration estimates that one in four of today’s 20-year-olds will become disabled before they reach retirement age—a much higher probability than most realize.
According to the findings of a new study by The State Farm Center for Women and Financial Services at The American College—the nation’s leading authority on economic issues and opportunities for American women—most people lack knowledge about the health risks, consequences and financial preparation needed to face a disability.
The research reveals a great need to educate Americans, particularly women, about the high incidence of disability, and a call to better prepare for the financial impact that a disability can have on lives and families. For most Americans, their ability to earn an income is their most valuable asset and few have planned for the loss of this ability, putting their financial futures at great risk. Awareness and planning are especially important for those with the most vulnerable to significant economic loss: women, those with decades of income from employment ahead of them and parents of young children.
Since increasing awareness is the first step in improving the ability to meet financial challenges, here are five surprising facts about disabilities:
Fact 1: The leading cause of disability is often mistaken.
The overwhelming majority of respondents in The American College study (97 percent) failed to correctly identify arthritis as the leading cause of disability. The largest group of respondents, 30 percent, misidentified “accidents” as the leading cause. In reality, work-related accidents account for less than 5 percent of disabilities. The remaining 95 percent are caused by chronic illnesses, according to the Council for Disability Awareness.
Fact 2: Women have a higher incidence of disability.
The Centers for Disease Control and Prevention have found higher rates of disability reported by females across all age groups when compared to males. Arthritis disproportionally impacts women, leaving them particularly vulnerable to financial hardship stemming from a loss or reduction of income. Women (18 percent) also express more concern about the impact a disability could have on their financial situation versus men (12 percent), according to The American College survey.
Fact 3: The financial consequences of disability can be severe.
Most people are unaware of the earning power that is lost over a lifetime if a disability occurs. For example, someone with an annual income of $50,000, who works for 40 years, is projected to make more than $2 million in future earnings. A loss of these earnings can be detrimental for an individual or family’s livelihood and future.
These financial consequences may be even more alarming for women. Women (22 percent) are almost twice as likely as men (12 percent) to think their cash reserves would last less than one month if faced with a disability. Unmarried women have an even bleaker outlook.
Fact 4: Most lack financial plans to deal with disability.
Dealing with a disability could halt savings for retirement, a child’s college education, funds for medical care and even basic living expenses. In fact, most survey respondents plan to rely on savings to replace their income (71 percent), although most admit their cash reserves would run out in less than six months.
Fact 5: Most are uninformed about disability insurance coverage.
Sixty-one percent of women and almost half of men (46 percent) have never researched disability insurance and less than 10 percent of people have purchased individual disability insurance plans. Almost half of employed individuals obtain disability policies through their employers, but most don’t feel knowledgeable about their policies.
Only four in ten Americans are aware that disability insurance payments last for a specified period of time–not for as long as a person is disabled or unable to work–and just 27 percent of people know that employer-provided benefits are typically taxed.
While it’s impossible to be prepared for all that life throws at us, it is possible to be proactive and start putting a financial action plan in place for an expected illness or disability that may someday impact you and your growing family.
Mary Quist-Newins, MBA, CFP, CLU, ChFC, is an assistant professor and director of the State Farm® Center for Women and Financial Services at The American College.