How to Insure Your Income: The Risk of Disability

Mark Twain said that there are only two certainties in life -- death and taxes. Although it's not quite so certain, the probability of a disability occurring before you reach the normal retirement age of 65 is substantial. The chart on the following page depicts this probability.

Clearly, your possibility of becoming disabled during peak earning years is substantial -- especially for people age 50 and younger. But that doesn't mean things get better with age. Although the overall risk decreases as you get older, the duration of the average disability increases.

The Probability of at Least One Disability Lasting 90 Days or More Prior to Age 65

Current

Age	Probability
25	4 out of 5	80 percent
30	7 out of 10	70 percent
35	2 out of 3	67 percent
40	2 out of 3	67 percent
45	1 out of 2	50 percent
50	1 out of 2	50 percent
55	1 out of 3	33 percent
60	1 out of 5	20 percent

Source: Commissioners Disability Table

The older a person is at the onset of a disability, the longer the average duration of the disability. Also, the older the person is, the less likely he or she is to totally recover. The probability of a disability becoming permanent at older ages is much greater than the probability of a permanent disability striking a much younger person.

The following chart illustrates the relationship between age and the average duration of a disability.

The Average Duration of a Disability that Lasts for More Than 90 Days

Age at Onset	Duration
25	4.3 years
30	4.7 years
35	5.1 years
40	5.5 years
45	5.8 years
50	6.2 years
55	6.6 years

Source: Journal of the American Society of Certified Life Underwriters

The numbers are all pretty disturbing. But the trend clearly gets more disturbing as people get older.

One reason for the increased duration of the average disability as you get older is the fact that your body does not respond to trauma in the same way it did when you were young. For example, small children can experience major accidents or sicknesses and "bounce back" much more quickly than an older person.

Another factor that also might cause increased duration of disabilities among older people is motivation. Insurance companies that do a lot of business in disability coverage claim that older people sometimes "subconsciously" decide to ease their way into retirement as a result of a disability.

According to this scenario, which few insurance companies discuss publicly, a 55- or 60-year-old simply may not be as motivated to return to work following a serious disability.

But there is something of a silver lining: A person is more likely to become disabled than to die at most given ages. As we've seen, there is a 70 percent chance that a 30-year-old male will incur a disability before age 65. The likelihood of this same individual dying at age 30 is less than 1 percent.

A standard mortality table will show this tendency is true at most points between ages 30 and 65. For just about any person in the work force -- even an older worker -- the chances of becoming disabled are greater than the chances of dying.