There are a number of myths that are causing many workers to not buy disability insurance, according to Prudential's whitepaper, “Why Disability Income Protection Should Be Part of Your Financial Wellness Toolkit.”

While a majority of employers offer short-term disability and long-term disability benefits to their employees, only 38 percent of workers in private industry were participating in STD income insurance; 33 percent were participating in LTD income insurance, and more than 50 million U.S. workers don't have disability income insurance.

“Prepared or not, most Americans are at least aware that they should attempt to save for emergencies and retirement,” the authors write. “Most, however, overlook taking the right steps to protect against one of the greatest threats to their overall financial security: being unable to earn a paycheck as a result of a short- or long-term disability.”

“The cruel irony of this is that evidence shows that those who are financially stressed are at an increased risk of experiencing a disability,” they write.

Many workers are not opting for these benefits because they erroneously believe that a disabling illness or injury will be automatically covered by workers' compensation or Social Security disability insurance. However, workers' comp benefits only cover accidents or injuries that happen at work and SSDI benefits pay just above the poverty level – just $14,364 a year on average. Moreover, the benefits aren't automatic, as the there are stringent eligibility requirements for SSDI, and the average processing time is more than two years.

Other myths that keep people from buying disability insurance include the false assumption that young people are not likely to suffer from a disability; that the individual has enough savings to cover time off; and that enrolling in disability insurance is time-consuming and requires a medical exam.

Employers can help dispel these myths and also make it easier for workers by auto-enrolling them into disability insurance plans, following 2018 guidance by the Labor Department, according to Prudential.

“Employers need to devote extra effort to communicating the criticality of preserving an income stream in the event of a disability,” the authors write. “This must include grounding employees in the reality of what it means to be disabled and the likelihood of incurring a disability, since some of the most common triggers of disability claims include pregnancy, debilitating pain from musculoskeletal disorders, digestive disorders and mental health issues including depression and anxiety.”

Employers should also make sure they have a comprehensive and effective return-to-work program in place that helps workers overcome any psychological as well as physical barriers they may face coming back to work after suffering a disability, according to Prudential. “A properly implemented RTW program helps employees shift their focus away from the experience of being disabled and back to rejoining their workplace community, regaining much-needed income, and getting back on a path to financial wellness,” the authors write.

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Misconceptions of coverage driving low participation in disability insurance

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