Pricing, Value and Discounting   Recently updated !

This is the pricing model for too much of the HVAC industry, High-Value/Low Price

To discount or not to discount, that is the question.  When should you do it?  How often should you do it?  Who should be in charge of it?  What are the price of your products set by?  Are they set by what the market will bear?  (Bad idea) Are they set by a cost + model?  (Better, but not ideal by any means)   Do you even know?  How should they be set? The answers to these questions are critical to the success and profitability of your business.

Product pricing is one of the most strategic elements of the marketing mix in your entire business arsenal.  You can’t afford to get it wrong.  In simplified terms, you need to first decide what kind of value proposition you want your business to model.  Do you want to run a high-volume, low-margin model?  Do you want to employ a high-value, high margin model?  Most businesses in our industry are somewhere in between, if they have even thought about it.  So there you are – think about it!

If you wish your company to be seen as a professional organization that operates above the run-of-the-mill contractor, with knowledgeable service and installation people, professional looking vehicles etc., then you must price for it.  First, you must know your costs.  Then, once you have a firm idea in mind of what you want your business to look like in the eyes of the consumer, determine what level of profitability matches that look.  What about local market prices for your products and services, where do they come in?  It is important to know what your competitors charge in the local market, but that should only be a measure of where they stand versus the value your organization brings to the consumer.  The problems come when your prices are either too high for the value you offer – or too low.  Anyone in your organization who comes into contact with a consumer simply must know and buy into your organization’s value proposition.  They must be convinced that what they are asking the consumer to pay is worth it.  If they have a problem asking the consumer for a fair price relative to value received, you have the wrong employee.

What about discounting, when is it appropriate?  Do you know what percentage of your company’s sales are discounted?  If not, that is a good place to start.  Excessive discounting can be like a disease that slowly but insidiously eats away at the value of your company from within.  Your sales and service people need to have clearly identified guidelines as to when they can and cannot discount.  If they are paid a commission, it should be lessened if they close the sale by discounting it.  It is important that they personally understand the connection between discounting and profitability, both personal or organizational profitability.  Excessive discounting, either in the level of discount offered or the frequency of how often it is done will leave your customer confused and worse.  The worse part potentially manifests itself in consumer mistrust of your organization.  That makes it harder the next time you try to convince the consumer of the value you are providing with your organization, product and service.  In addition, by discounting you’re training the consumer to ask for a discount again next time.  Think Sirius Satellite Radio.

What is a better path of showing value?  Consider the following.

  • Take the time to understand your customers needs and desires
  • Clearly present a solution that you believe satisfies these needs and desires
  • Make sure to link the benefits of your product and service to your customers needs and desires

If you must discount, make sure you commensurately reduce the value of the product or service offering.  (offer a lower SEER rated air conditioner for example) By doing that, you are maintaining the integrity of the value proposition and not confusing the customer.


Criticism

Criticism Is Just Another Form of Feedback – Channel It To Drive Your Organization Forward

If you have ever been in a leadership position, whether at work or elsewhere, being criticized comes with the territory.  If you are trying to move your organization forward, you will be criticized by those who don’t embraced the change.  Conversely, if you are not doing anything, you will be criticized by those who feel you should be.  How you handle this criticism will be key to how effective your leadership will be.  What are some of the keys to managing criticism?  Consider the following.

  • First, recognize that with leadership comes criticism.  If you do not want to be criticized, do not aspire to leadership.
  • Do not take criticism personally.  This is perhaps the most difficult thing to do because your emotions want to intervene.  Don’t let them.
  • Be appreciative of the criticism.  Without it, you cannot learn what course corrections may be needed.  Encouraged genuine, constructive criticism.
  • Ferret out genuine criticism from the whining and complaining.  Genuine criticism represents another’s opinion, which is designed to offer an opposing viewpoint meant to improve the situation.  Whining and complaining is just that, it is not offered as a means to improve the situation.  If you’re not sure if the criticism is genuine, drill down and ask questions designed to reveal the motive of the one who is criticizing.  You will usually be able to find out pretty quickly if the criticism is sincere or not.
  • If you continue to hear the same or similar criticisms about a policy or situation, dig deeper.  This typically represents real opportunity for improvement.  Whatever you do, don’t ignore it.
  • Develop a network of go-to people.  You need to have some people whom you trust, whose judgment you value, and who will give you the unvarnished truth.  Don’t be afraid to seek their opinion, and be open to their feedback even if it does not agree with your opinion.
  • Don’t beat yourself up.  If you have done your very best to field the complaint without emotion, evaluate for merit, then institute corrective action, that is all you can do.  Keep your eyes focused on the goal and keep moving, because just like the news cycle, there will be new complaints coming your way that you must be attentive to.

Criticism can either be crippling or can serve as a catapult for positive change.  How you view it may in large part define your success as a leader.


Leaders Versus Managers

Leaders Versus Managers
Leader or Manager, the direction couldn’t be more clear!

Would you describe your boss as a leader or manager?  If you are the boss, would you describe yourself as a leader or manager?  Odds are, if you are the subordinate, you might describe your boss as a manager, but if you are the manager, you might describe yourself as the leader.  Does it really matter, is there a difference?  Webster’s defines a manager as a person responsible for controlling all or part of a company, a person who controls the activities of an employee, a person who is in charge.  They define a leader as a person who leads or commands a group, a person who is the principal player in a group.  As the person in charge, which would we rather be?

I think we would all agree that we would rather be a leader than a manager, and we would rather work for a leader than a manager.  So what are some of the key behaviors that a leader should cultivate which will cause employees to actually want to work for them?  The first one is easy to understand, but sometimes hard to do.  Learn to listen to your employees, really listen.  They are the closest person to the task you ultimately have responsibility for, so they likely have the best perspective on how to best accomplish the task.  Listen to what they have to say about it.  By listening as opposed to telling, you will better understand aspects of the task that they struggle with because of lack of knowledge, improper tools or difficult conditions.  You may ultimately disagree with their assessment, but if you dismiss their feedback out of hand, you will start to lose their trust.  You may also learn something that can help you make the task easier and more efficient for your employee (s).

Instead of telling your employees about a task, show them or let them know why it is important.  When they are connected to the bigger picture of a task, they become more committed to it and in seeing it done correctly.  There is no better time for this then after a mistake has been made.  How many times have we made a mistake on the job, only to be yelled at by our boss about it?  How did that make us feel?  If you are a leader, you use mistakes by your employees as training opportunities.  If someone never makes a mistake, they are not trying hard enough.  Mistakes are normal because people are human.  A mistake is only bad if we do not learn from it and implement corrective action.

As a manager, your focus is to control a group of people in order to achieve a desired output of work.  As a manager, you are driven by power and control.  Managers often not only plan out the work to be done, but they also want to tell employees how the work should be accomplished.  When something doesn’t get accomplished in the proper quantity, quality, or timeframe, a manager’s focus is on blame – often making sure it does not reflect on them.  A manager’s focus is typically short-term in nature, this week’s production, this quarter’s goal etc.  A manager sees their job as conforming to the rules as they understand them, and making sure that everyone abides by them.  Managers are typically more task focused than people focused.

As a leader however, your focus is to influence, motivate and empower others to achieve a collectively desired goal.  As a leader, you are driven by seeing others succeed and grow while achieving organizational benchmarks.  A leader uses their influence to motivate others.  Instead of telling their employees what needs to be done and how it is best accomplished, leaders set a tone by letting their employees see the big picture of how their collective tasks fit in to the whole.  Leaders encourage their employees and are not bound by past precedent.  Leaders have a longer-term focus, and see mistakes as an opportunity for learning, not for blame.  Leaders find ways to motivate and inspire others, and are typically more people focused in how they accomplish a task. So, are you a leader or manager?


Tolerating Temper Tantrums

Tolerating Temper Tantrums
When you see this behavior, you must act quickly to nip it in the bud.

We are all familiar with temper tantrums thrown by children, some of them have been from our own kids!  What happens however when adults throw a temper tantrum at work?  For example, what should you do if an employee, enraged over a phone conversation, rips the phone from its cord and throws it across the room?  If the employee is a top performer or essential employee, do you ignore this behavior?  Should you?  The answer is – absolutely not!  Tolerating such behavior essentially tells other employees that doing such things is okay, and it provides cover for them to do something similar.  In addition, you are training the abuser to continue their unacceptable behavior.  Over time, this can create a toxic atmosphere in your company.  How widespread is this issue anyway?  Consider the following statistics.*

  • 60 million Americans are affected by abusive conduct in the workplace
  • 61% of Americans are aware of abusive conduct that takes place in the workplace
  • Up to 81% of employers are perceived as doing nothing, and resist taking action when targets of abusive conduct fill out a survey
  • 71% of employer reactions are harmful to the workplace targets of abusive behavior
  • 29% of employees who are targets of abusive behavior remain silent about their experiences
  • To stop abusive behavior in the workplace, 65% of targets lose their original jobs

* Statistics from the June, 2017 National Survey On Workplace Bullying by WBI

So, what should you do when such behavior is exhibited, given that you are not willing to tolerate it?  Essentially, you have two choices.

  1. The easy path is to simply fire the employee.  On the positive side, this sends a clear message to all employees that abusive behavior will not be tolerated.  On the negative side however, you lose a top performer without finding out if they could be rehabilitated.
  2. The more difficult path is to document the abusive behavior, coach the employee, and put in place a corrective action plan for them.  If that does not work, proceed to termination.

If option #2 is chosen, it is important to immediately react to the negative behavior by sitting down with the employee and take the following steps.

  1. Describe the offending behavior to the employee by describing their specific actions.
  2. Explain to the employee the impact their behavior has on other employees as well as customers
  3. Let the employee know what behavior(s) you will not put up with in the future.  Also, let them know exactly what will happen if they exhibit such behavior in the future, up to and including termination
  4. If such behavior occurs again, you must act – and quickly.  You must also be prepared to terminate the employee if necessary

If you have an employee handbook, you should include a discussion about abusive workplace behavior, and consequences for same.  Know however that actions speak louder than words, and as the employer, you must be prepared to act on the words you have committed to.

Source: thebalancecareers; How to Deal with a Bully at Work


Succession Planning – For the Mid-Level Manager

Do you have a succession plan for your firm?  If the research is true, probably not.  According to a recent study,* two thirds of public and private companies say they don’t have a formal CEO succession plan in place.  Do you need one?  A lot of people don’t think so.  According to an online Harris poll, 47% of respondents don’t believe a succession plan is necessary.  And they would be correct – as long as they don’t care about the future viability of their organization.  Given those statistics, the odds are slim that organizations have any kind of plan in place for the succession of key positions beyond those of the CEO.  How would you replace your service manager, sales manager, product manager, marketing manager etc. if they left tomorrow?  Most organizations would struggle and their business operations would suffer, at least for a while.  It doesn’t have to be that way.

Succession planning doesn’t need to be complicated…it just needs to be done!

According to research cited by Ultimate Software, there are real, measurable differences in the performance between organizations that have comprehensive succession planning with those that don’t.  Comprehensive succession planning goes beyond the chief executive officer or the chief financial officer.  Comprehensive succession planning extends to all key positions within the organization.  “This takes time,” you say.  “The hassle factor and time that this would take more than offset the benefits,” you add.  Consider what this research found.

  • More than 90% of 18-34-year-olds say a clear succession plan would boost their level of engagement
  • 94% of employers report that having a succession plan positively impacts the entire workforce
  • 32% of people say they would quit if there was no room to learn, grow or advance at their job

Furthermore, this research shows that preparing high potential and high-performing employees for progression in the organization by investing in their development, will demonstrate your commitment to them.  Even if you disregard the research, you intuitively know that employees are more likely to stay with an organization that believes and invests in their future.  So, why don’t more organizations do this?  Perhaps they don’t know where to begin.  The thing is however, it doesn’t have to be complicated.  A simple approach might be accomplished with the following steps.

1.  Identify the key positions in the organization that you want to succession plan for.  Work with the individuals currently in these positions to identify the key strengths and behavioral traits necessary to be successful in these positions.

2.  Identify the training, personality traits and on-the-job experiences that will be needed to successfully groom an individual to move into each of these key positions.

3.  Identify individuals in the organization who have the potential to move up based on their current job performance and personality traits.

4.  Working with the high potential individuals, invest in training previously identified to help them prepare for future responsibilities.  In addition, expose them to on-the-job experiences that can help them use this training in real life situations.

There is specialized software that can help you with this task.  For example, a software program by the name of UltiPro Succession Management by Ultimate Software was designed specifically for this purpose.  For more information on the research as well as the software cited in this study, see the link below.  How expensive is software like this?  Online research shows that services from similar companies usually cost around $5-$10/employee/month for basic services, while more extensive applications cost $20-$40/employee/month.  No matter how you do it, you owe it to yourself to invest in some type of succession planning for your organization’s future.

https://www.ultimatesoftware.com


Voice Technology: Science Fiction & The Future

Voice technology has always been part of our imagination.  Back in the 40s, Dick Tracy had his watch, and voice operated computers were what made Star Trek and 2001 A Space Odyssey possible.  In large part however, voice technology remained the domain of science fiction.

Voice Technology: Science Fiction & The Future
How soon will it be before we see this ad in the classified section of our trade pubs?

In 1997, Dragon Systems released NaturallySpeaking 1.0 as their first continuous dictation product.  At that time, the error rate for speech recognition was over 43%.  Technology rapidly advanced however, and by 2001 that was down to 20%.  Speech recognition was still being treated more as science fiction than mainstream communication however, and over the next decade the error rate only declined to about 15%.  It was only when speech recognition was “disassembled” into its three major components did improvement accelerate.  There are three models that work together relative to speech recognition: the acoustic model, the pronunciation model and the language model.  The acoustic model takes the waveform of speech and chops it up in the small fragments, and figures out each sound that the person is speaking.  The pronunciation model takes the sounds and strings them together to make words, and the language model takes the words and strings them together to make sentences.  By 2016, a Microsoft research team got the error rate down to 5.9% – which matched the human error rate when a professional was hired to transcribe data.  Further advancements since then have the error rate down to about 4.9 %.  It is these most recent advances which have brought voice technology into the mainstream with products such as Amazon Alexa and Apple’s Siri.  The pace of voice technology innovation is accelerating once again as auto manufacturers and others are engaging in joint research projects to figure out how to make their products simpler and easier to use.  Once driverless technology goes mainstream, Honda envisions that their vehicles will completely change our notion of transportation.  According to one company spokesman, in the not too distant future the car is going to be an arcade, a theater, a classroom or an office – all by using your voice.  So, what does that mean for the HVAC/construction trades industry?

The trades industry have long suffered from a shortage of new talent, and that squeeze is only going to be exacerbated in coming years.  Might the advance in voice (and other) technology completely change your business and be part of the solution to this vexing problem?  Consider the following scenario in 2025.  (Six short years away)

A homeowner gets into his self driving vehicle and buckles up for the ride to work.  He grabs his tablet to check on the news, while using his voice to call his local HVAC contractor to check on the status of the technicians arrival.  Overnight, a component in his air-conditioning system had sent out an SOS because the system was no longer able to maintain the desired setpoint.  Having already queried the air-conditioning systems diagnostics panel remotely, the technician confirms her time of arrival to correct the deficiency.  Now, let’s repeat that call in 2030.  (Just 11 years away)

The air-conditioning system experiences a problem overnight which no longer allows it to maintain the homeowners desired setpoint of 0.5°F in each zone of the house.  The air-conditioning system automatically contacts its preassigned robotic technician, who queries the components and system operation diagnostics using AI technology to figure out the problem.  Within seven minutes, the problem is correctly diagnosed as a malfunctioning component, and the robotic technician scans the shops inventory only to find out the part is not in stock.  Two minutes later, the robotic technician places an online order with the local HVAC parts and supplies center to have the part delivered via drone to the homeowners residence by 9 AM the next morning.  At 9:30 AM the robotic technician arrives in a driverless vehicle and picks up the part from the secure storage unit on the homeowners porch.  The robotic technician lets itself into the house by accessing the home security system, which already knew the technician was coming.  Within 36 minutes the faulty component has been replaced, and proper operation sequence is confirmed within 10 minutes after that.  Forty-seven minutes after arriving at the homeowners residence, the robotic technician is already on its way to the next call.

Science fiction?  Perhaps, but likely only in the timeline before this becomes a reality.


You Talk Too Much!

Have you ever known someone who talks nonstop, the type of person with whom you can never get a word in edge wise?  Of course you do.  They are the proverbial chatty Charlie or chatty Cathy.  Of course, some of us are more talkative than others, and there is no clear-cut definition as to when the line is crossed between being chatty and wearing you out.  The answer is – it depends!  That is, it depends on you, as everyone has a different threshold.  What are some of the reasons chatty people talk so much?  Consider these possibilities.

You talk too much
This Driver might appear to be winning her argument, but is this Amiable actually listening?

The person you are talking with is anxious about the situation they are in, the surroundings they are in or about the fact they are speaking with you.  If you are an executive or are perceived to hold a position of power, people might have anxiety speaking with you.  Their nervous reaction is to keep talking.  Another possibility is that this person wants everyone they speak with to share their point of view, and they believe the only way to get you to listen is to tell you everything they know.  They don’t see themselves as trying to influence you so much as to teach you about what they now.  Yet another possibility is that they want others to see themselves as having status, as being the one in charge, or the one who knows the most.  We might see any of these people as being really friendly – or really irritating – depending on the type of people we are.  To understand the type of people we are, we have to look at social styles.  Founded by the Tracom, Group, Social Styles® is the world’s leading behavioral style model.  Only by better understanding ourselves can we more effectively communicate with others.  According to this model, there are four unique social styles, as discussed below.

Analytical Style.  These type of people are thinkers, and need a lot of information before making decisions.  They typically ask a lot of questions.  They often feel the need to be correct.

Amiable Style.  These type of people are focused on relationships and are often seen as friendly and warm.  They openly show emotions and feel the need for personal security.

Driver Style.  These type of people are seen as action oriented, efficient and assertive.  They are typically quick to act but slower to listen.

Expressive Style.  These type of people are creative and enjoy sharing ideas and perspective with others.  Ultimately, they thrive off spontaneity and need personal approval.

While the full scope of understanding of this behavioral model is beyond the scope of this column, it allows you to think about your style and how to best interact with others whose style you perceive to be very different from your own.  For example, imagine a situation where a driver is in conflict with an amiable.  The amiable person perceives the driver to be acting without listening, and has been hiding how they feel about it.  Meanwhile, the driver person perceives the amiable as someone who is not focused strongly enough on action, because they are always talking.

In the final analysis, you can only control yourself.  Resolution is most achievable and yields the best outcomes when two things happen.

A.  You understand your social style and how you might be perceived by others

B.  You adapt your behavior to become more in sync with the other person’s social style, thereby reducing conflict and enhancing true communication

For a deeper understanding of this topic, please visit https://tracom.com/social-style-training/


JOE GROH’S VISION For Small Business

For Years, Joe Groh’s vision was for employee security for everyone in the construction trades.

JOE GROH’S VISION for small business owners was for them to be able to:

  • attract the Best with incentives to work for your company that other contractors can’t offer.
  • give all their employees and their families peace of mind and security that other contractors can’t offer.
  • create employee loyalty that goes beyond a paycheck

Now, That Is Possible – Even For Small Business Owners

  • Short Term and Long Term Disability Insurance
  • Life Insurance

Believers in Joes vision persuaded UNUM to independently develop an exclusive benefit package, offered through a licensed insurance agency, ONLY for owners of Residential Repair and Replacement Industry companies and UNUM added:

  • 24/7 Employee Assistance Program (EAP) for employees
  • Worldwide travel assistance for them and their families
  • With NO Underwriting and guaranteed rates for two years

Option 1 –       Long Term, Short Term Disability and 20K Life Insurance

  • Cost to Employer per Employee $0.38 per Hour / $65.87 per Month

Option 2 –       Long Term, Short Term Disability and 50K Life Insurance

  • Cost to Employer per Employee $0.43 per Hour / $74.40 per Month

Additonal options

  • Buy Up on Life Insurance
  • Voluntary Dental and Vision

*Costs to Employer above is based on an employee with an estimated income of $52,000 annually.

To find out more, email: joesvision@josephgrohfoundation.org or contact John Bouche at (702) 984-3747.  John is not affiliated with the foundation, but is an avid supporter of Joe’s Vision. 

UNUM provides affordable access to disability and life insurance for 36 million people, and is #267 on the Fortune 500 list


Access To And Cost of Disability Insurance

Disability Insurance 101

Access To And Cost of Disability Insurance

The Bureau of Labor Statistics estimates that as of April, 2016 there are about 122.74 million people working on a full-time basis.  According to the chart below, only about 37% of private sector employees are covered by long-term disability insurance.  This would suggest that only about 45 million full-time workers are covered by long-term disability.

According to Kaiser Health News, only 47% of employers offer long-term disability coverage to their employees, and companies with at least 100 employees are almost certain to offer some sort of disability benefit.  Furthermore, they report that the majority of people with disability coverage get it through their jobs.  The chart below offers a glimpse of disability insurance coverage by occupation group.

Access to disability benefit combinations, by occupation group, private industry workers, March 2014
Occupation group Percent with access to both short- and long-term disability insurance Percent with access to only short-term disability insurance Percent with access to only long-term disability insurance Percent with no access to insurance
All workers 25 15 9 51
Management, professional, and related 42 12 17 29
Service 6 14 4 76
Sales and office 25 13 9 53
Natural resources, construction, and maintenance 21 18 6 55
Production, transportation, and material moving 25 22 7 47
Note: Costs calculated from Employer Cost for Employee Compensation (ECEC) published estimates. Source: National Compensation Survey, U.S. Bureau of Labor Statistics.

The cost of providing both short- and long-term disability insurance access to all private sector workers would be approximately 1.0 percent of total compensation. This would cost an employer $624 each year for a full-time (2,080 hour) worker, as illustrated below.

Estimated cost of access to short- and long-term disability insurance, by occupation group, private industry workers, March 2014
Occupation group Short-term disability insurance Long-term disability insurance  
Percent with Access Benefit cost per hour worked Employer access cost per hour worked Percent with Access Benefit cost per hour worked Employer access cost per hour worked  
All workers 40 $0.06 $0.15 34 $0.05 $0.15  
Management, professional, and related 54 $0.10 $0.19 59 $0.09 $0.15  
Service 20 10  
Sales and office 38 $0.04 $0.11 34 $0.03 $0.09  
Natural resources, construction, and maintenance 40 $0.09 $0.23 27 $0.03 $0.11  
Production, transportation, and material moving 47 $0.06 $0.13 31 $0.06 $0.19  
Note: Costs calculated from Employer Cost for Employee Compensation (ECEC) published estimates. Dash indicates data not available or applicable. Source: National Compensation Survey, U.S. Bureau of Labor Statistics.  

As seen in table 6, the cost of access for short-term disability and long-term disability across all private industry workers is $0.30 per hour worked ($0.15 each). The estimate ranges from $0.11 for sales and office workers to $0.23 for natural resources, construction, and maintenance workers. There are no reliable estimates for service workers, which is not surprising given that few service workers have access to employer-provided disability insurance. As a whole, however, the cost of providing both short- and long-term disability insurance access to all private sector workers would be approximately 1.0 percent of total compensation cost ($0.30/$29.99). This would cost an employer $624 each year for a full-time (2,080 hour) worker.

Of employers that offer disability coverage 37% paid the entire premium in 2010, down from 49% in 2002.  As of 2011, voluntary programs (meaning the employee pays the full cost) make up 50% of all long-term disability offerings, up from 41% in 2002.  According to the Council for disability awareness, however, when employers add disability insurance as a voluntary benefit, participation is only around 40%.

Sources:

  • Forbes
  • Counsel for Disability Awareness
  • US Bureau of Labor Statistics
  • Kaiser Health News

The Case for Disability Insurance

How Prepared Are You?

A major disability is something that happens to someone else… until it doesn’t!  The sad fact is most Americans are better prepared to die than they are to deal with disabilities.  If you are in your twenties, the chances are you rarely think about this.  But you should.  Just over one in 4 of today’s 20-year-oldswill become disabled before they retire.In fact, over 37 million Americans or about 12% of the total population are classified as disabledMore than 50% of those disabled Americans are between the ages of18-64.  At the end of 2012, 8.8 million wage earners representing more than 5% of the entire workforce were receiving Social Security disability insurance, (SSDI) 2.5 million of these were in their twenties, thirties or forties.  But I’m careful, I eat healthy and work out you say. As it turns out, accidents are NOT usually the culprit.  Statistically, about 90% of disabilities are caused by illness.  Cancer, heart disease and other illnesses cause the majority of long-term absences.  Consider the following statistic for a35-year-old male. 

Anon-smoking male, 5’10”, 170 pounds, who works an office job with some outdoor physical responsibilities and who leads a healthy lifestyle has the following risks:

  • A 21% chance of becoming disabled for 3 months or longer during his working career
    • Of these, 38% run the chance that the disability will last 5 years or longer
    • the average disability length for this person is 82 months

Similarly, a35-year-old female weighing 125 pounds has a 24% chance of becoming disabled for 3 months or more during her working career. As you can see, the chances are simply too great to ignore for the average working person.  Furthermore,most people think that Workers Comp or Social Security Disability insurance will cover their needs if they become disabled. According to the Council for Disability Awareness, less than 5% of disabling accidents and illnesses are work-related.  The other 95% are not, meaning Workers Compensation does not cover them.  In addition, according to the Social Security Administration, 65% of initial SSDI claim applications were denied in 2012. The average SSDI monthly benefit payment for males was $1256 and for females was $993, with 93% of all recipients receiving less than $2000 per month.

Given these numbers, how well prepared are American workers for disability?  Not very. Forty-eight percent of US families do not save any of their annual income, and one third of working families have no retirement savings.  Consider the following chilling statistics.

  • 68% of adult Americans have no savings ear marked for emergencies
  • 65% of working Americans say they could not cover normal living expenses even for one year if their employment income was lost.
  • 38% could not pay their bills for more than 3months.

 So what does the average family do when confronted with a disability?  They begin running up expenses on their credit cards, get a 2nd mortgage, cash in their 401(k) or take out a home equity line of credit and ask family and friends for assistance through sites like go fund me.  As you might guess from the above numbers however, these solutions are inadequate.  According to a Harvard study, 62% of all personal bankruptcies and over 50% of mortgage foreclosures are a consequence of disability, and many end up on Medicaid for insurance.  Keep in mind that while Medicaid rules vary from state to state, the general requirements for income are less than $931 per month and countable assets of $2000 per person, not including your primary residence (with limitations based on your home equity), personal property and household belongings and up to one motor vehicle.  ($3000 per couple living in the same household)

What is the answer then?  Disability insurance!  How common is it?  Consider:

  • 65-70 % of workers in the private sector have no long-term disability insurance
  • That equates to about 75-80 million private-sector workers who are without long-term disability income insurance
  • Worse yet, only 46% of workers have even discussed disability planning
These costs are immediate, expensive and often not covered by insurance!

Sources

disabilitycan happen.org

AmericanJournal of Medicine

US SocialSecurity Administration

Counsel forDisability Awareness

US FederalReserve Board

AmericanPayroll Association

Get Sick, Get out: The Medical Causes of Home Mortgage Foreclosures