If you’re injured or become ill and can’t work, individual disability insurance provides direct payments that you can use to cover life’s expenses. Disability insurance essentially replaces your regular income, making it a valuable safety net for people with a steady income but limited savings.
But despite its importance, most people don’t understand what disability insurance is or how it works, according to the 2024 Policygenius Disability Insurance Literacy Survey. When asked to choose a response option that best describes disability insurance, 64% of people picked either the definition of a different type of financial protection (like life insurance or health insurance) or said they weren’t sure.
Majority of people who would benefit most from disability insurance don’t understand how it works
Disability insurance generally has the most upside for high earners and young people who are still in the early stages of their careers. A long-term disability insurance policy can potentially replace millions in future earnings while protecting any savings if you become disabled and can't work.
But many high earners and young people, the groups who stand to benefit the most from disability insurance, don’t know what it is or how it works.
Most high earners don't understand disability insurance, especially those with limited savings
We found that just 44% of higher earners (annual income of $80,000 or more) correctly described disability insurance, while 56% were either unsure what it was (17%), gave an incorrect answer (30%), or selected “none of the above” (9%).
We also found a correlation between not knowing what disability insurance is and having a limited savings cushion. Of higher earning Americans with six months or less in savings, 59% answered incorrectly or were not sure, compared to 52% of higher earners with more than six months in savings.
More than 3 in 4 young adults don’t know what disability insurance is
Just 22% of younger adults (age 18 to 34) picked the correct definition of disability insurance, which was much lower than that of other age groups, with 33% of 35 to 54 year olds and 48% of older adults (age 55 or older) choosing the correct definition.
3 in 4 US adults have six months or less in savings
Seventy-four percent of all adults have six months or less in savings, and 19% have no savings at all. Twenty-eight percent have just one month or less, 17% have two to three months, and 10% have four to six months. When it comes to a longer safety net, 19% of adults have more than a year in savings.
While younger adults are the least likely to understand disability insurance, our findings suggest they need it more than ever. Half of people age 18 to 34 said they have one month or less in savings, and altogether 82% said they have six months or less saved up.
That said, the younger adults are far from the only ones with limited savings. While adults age 55 or older are roughly twice as likely to have more than six months in savings (38%) compared to younger adults (18%), 62% of older adults said they have half a year or less saved up, as did 81% of those ages 35 to 54.
4 in 10 people thought disability insurance was something else entirely
In all, 64% of respondents didn’t know what disability insurance was. Nearly a quarter (23%) said they weren’t sure what disability insurance was, while 42% either chose an incorrect definition (28%), sometimes confusing it for another form of insurance entirely, or selected “none of the above” (14%).
Looking at the incorrect definitions chosen, 13% picked the definition of health insurance (“A type of insurance that pays for all your medical and hospital bills if you’re sick or injured”); 4% picked the definition of life insurance (“A type of insurance that provides your loved ones with lump sum payments if you’re disabled or deceased”); 3% thought it was a type of insurance that offers rebates on disability equipment and mobility aids; and 7% thought it was a government-run program that provides $1,000 monthly payments if you’re injured or become ill and cannot work.
Conclusion
While you can both have disability insurance and not understand how it works — like if you opt into coverage provided by your employer just because it’s offered — our findings suggest that a majority of people may not know how (or when) to take advantage of their benefits.
Furthermore, group disability insurance plans offered through employers will often provide benefits for a maximum of six months, which means that even if you have this kind of policy you’ll need your own private long-term disability insurance to cover anything beyond that. By not knowing how disability insurance works, people may be without the long-term coverage they need.
Methodology
Policygenius commissioned YouGov Surveys to poll a nationally representative sample of 2,353 adults aged 18 and older. The survey was carried out online between April 25-29, 2024. Figures have been weighted and are representative of all US adults aged 18+. The average margin of error for responses is +/- 2%. For more details, see YouGov’s methodology. Percentages were rounded to the nearest whole number, so some totals may not add up to 100.
About Policygenius
Policygenius, a Zinnia company, is a one-stop insurance platform that makes it easy to compare and buy policies, get unbiased expert advice, and manage an insurance portfolio in one seamless digital experience. Alongside the intuitive enterprise technology solutions and insights offered by parent company Zinnia, an Eldridge business, Policygenius is helping create better end-to-end insurance experiences for shoppers, advisors, and insurers alike — and enabling more people to protect their financial futures along the way.
