The Statistical Likelihood of Becoming Disabled vs. Dying or the Need for Disability Income Insurance vs. the Need for Life Insurance.

So is it more likely that a worker will die before age sixty-five, or experience a long-term disability before age sixty-five? The table above shows the probability of having a disability lasting at least ninety days versus dying before age sixty-five starting at various ages ranging from age twenty-five through sixty for both males and females. For males ages twenty-five to fifty-five (over most of their working careers), the risk at each age of having a disability lasting at least ninety days by age sixty-five is about one-third higher than the risk of dying by age sixty-five. Stated another way, throughout most of their normal working careers, approximately four working men will experience a long-term disability by age sixty-five for every three working men who die by age sixty-five.

The risk of long-term disability versus death before age sixty-five is much higher for females than for males, ranging from about 4.5 times higher at age twenty-five to 2.5 times higher at age fifty-five. Above age fifty-five, the risks are almost identical.

The reasons for the differences between men and women are numerous, including that childbirth generally is treated as a disability and complications from childbirth can certainly extend periods out of work, sometimes far beyond ninety days. In addition, women as a whole experience lower mortality rates than men at all ages. In addition, working men, on average, perform work in more dangerous jobs than women. This means, on average, that men are exposed to a greater risk of work-related death than the average working woman. Therefore, because of the higher mortality rates for working men compared to working women, even if the average disability rates at each age were identical for men and women, the percentage of women who are more likely to become disabled versus dying by age sixty-five would be much higher.

So what ARE the probabilities of long-term disability for men and women?

The table below shows the probability of a disability lasting at least ninety days before age sixty-five for men and women at various working ages ranging from twenty-five through fifty-five. For males, the disability probabilities range from about 20 percent at age twenty-five down to about 13 percent at age fifty-five. For example, an average working man age twenty-five has about a one-in-five chance (20.2 percent) of experiencing a disability lasting at least ninety days before reaching the age sixty-five. At age fifty-five, about one out of eight working men (12.6 percent) will become disabled for at least ninety days before reaching age sixty-five.

For women age twenty-five, the disability probability is about 50 percent greater than for men age twenty-five (29.9 percent vs. 20.2 percent), but this difference declines at older ages until at age fifty-five the women’s disability rate is only about 7 percent more than the men’s rate (13.5 percent vs. 12.6 percent). Thus, the statistics show that younger working women have significantly greater risk than similarly aged men of experiencing a disability lasting at least ninety days before they reach age sixty-five, but this additional risk tends to dissipate as working women age. By age fifty-five, the disability rates differ by just 0.9 percent.

The reasons for the disability probability differences between men and women, once again, are numerous and not altogether known, but certainly one known factor is child-bearing. As described above, however, on average, men work in environments where the risk of death and disability is higher than for the environments where, on average, women work. Therefore, one would naturally expect that disability rates for women, at least outside the child-bearing years, would be lower than for men. However, that is not what the statistics reveal. Even outside the child-bearing years, women have higher disability rates than men.

The analyses so far have looked at disabilities lasting at least ninety days. Quite frankly, ninety days is on the shorter side of long-term. Most workers can probably manage to self-insure for 90-day periods or even 180-day periods, if necessary. In fact, the standard disability income policy is designed with an elimination period or waiting period of ninety days of disability before the policy will begin to pay benefits.

The risk that workers must seriously worry about is multi-year or permanent disability. The table below shows the probabilities for males and females of remaining disabled for two and five years after satisfying a ninety-day disability waiting period.

The table above reveals that 20.2 percent of males (or one-in-five) experience disabilities lasting at least ninety days between ages twenty-five and sixty-five. The table below reveals that 5.5 percent of males age twenty-five (or one-in-eighteen) will experience disabilities lasting ninety days plus two years between age twenty-five and sixty-five. Thus, for each male age twenty-five who experiences a disability lasting at least ninety days before reaching age sixty-five, more than one-in-four will still be disabled two years later (5.5%/20.2% ≈ 27%).

The table below also shows that 2.3 percent of age twenty-five males (or one-in-forty-three) will experience disabilities lasting ninety days plus five years. The 2.3 percent five-year rate is only slightly less than half of the 5.5 percent two-year rate, or about 12 percent of the 20.2 percent ninety-day rate. Thus, about three-in-seven of the males age twenty-five who experience disabilities for ninety days plus two years will still be disabled in three more years (five years and ninety days after the onset of their disabilities).

The first and the above tables show that disability rates for females are higher than for males at all ages (twenty-five to fifty-five) for all disability periods lasting at least ninety days and up to five years and ninety days. However, the above table also shows that the disability rate differentials between females and males diminish for all disability periods up to five years and ninety days at all ages from twenty-five to fifty-five.

Not surprisingly, individual disability income coverage is an especially vital concern for self-employed individuals. In the event of a disability, unless they have disability income coverage in place, self-employed individuals probably will not receive any income with which to meet living expenses. One study has concluded that almost one-half of bankruptcies are filed due to disabling medical conditions. This combined with the fact that one American in three between the ages of thirty-five and sixty-five will suffer a serious disability highlights the importance of disability income coverage.

But despite this importance, many working individuals do not have disability income coverage. According to one source, only 27 percent of American income earners have disability income insurance. Another source concludes that about 82 percent of American workers either have no long-term disability income insurance or believe that the coverage they do have is not sufficient.

For workers who are employees, their employers may provide coverage. Other self-employed workers and business owners may purchase their own coverage. Those employees who feel that their employers are not providing a sufficient disability income benefit for their perceived needs can purchase supplemental disability income policies directly from insurers up to certain combined limits set by insurers based upon a whole host of underwriting factors such as age, income level, class of work, avocations, other health risks, etc.

So, one interesting conclusion is that the reason Americans are so much more likely to suffer a disability during their working years is exactly because they are so much less likely to die during their working years. Since 1960, the frequency of death from the four leading causes has decreased, while the frequency and durations of disability have increased. For reference, the table below shows the leading causes of disability in the United States.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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