The subconscious reason why we're all bad judges of disability risk

Jennifer Fitzgerald Policygenius


Jennifer Fitzgerald

Jennifer Fitzgerald

CEO and co-founder

Jennifer Fitzgerald is the CEO and co-founder of Policygenius, a leading provider of financial protection, from insurance to wills.

Published May 24, 2013|3 min read

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In a previous post, I talked about 3 reasons why you probably don't have disability insurance. To not violate the rule of 3, and keep some material for an additional blog post, I didn't include a 4th reason: you're probably a terrible judge of insurance risk. Yeah, I said it. But it's not your fault - we all have hard-wired biases that affect our risk judgment.

But doubters gonna doubt, so let's put it to a test. See how accurately you judge insurance risk with the following disability questions. For the PolicyGeniuses, we've included some behavioral insights at the end of this post, which explain why you're probably going to answer these questions incorrectly (yeah, I said it again).

Question 1: How many of today’s 20-year-olds will experience a long-term disability (meaning they have a health problem that keeps them out of work for at least a year) before retirement?A. 1 in 2B. 1 in 4C. 1 in 10D. 1 in 20Question 2: Disabilities can be caused by illnesses or by accidents. How do these causes break down by frequency?A. About 90% of disabilities are caused by accidents. 10% are caused by illnessesB. About 90% of disabilities are caused by illnesses. 10% are caused by accidents.C. It’s about evenly split: 50% of disabilities are caused by accidents and 50% are caused by illnesses.The correct answer for both questions is B. Just over 1 in 4 of today’s 20 year-olds will become disabled before reaching age 67. And most work-limiting disabilities are caused by common illnesses like heart disease, arthritis or diabetes and not accidents. Those facts are probably surprising to you.*There have been amazing advances in medical technology. Doctors literally grew an ear on a woman’s arm for a transplant. (What!) But the sobering fact is that many of us will face some health condition that keeps us out of work for at least 3 months. And most of us would be hard-pressed to get by without a paycheck for that long. Income protection insurance (otherwise known as disability insurance) can protect against that risk (which is higher than you might have expected). If you think you might need this insurance, then consider looking into it now. Disability insurance cost increases with age – but you can lock in rates at your current age and get long-term coverage.

* What’s up with that? The scientific explanation for the PolicyGeniuses

If you guessed incorrectly about those insurance risks, you may be guilty of availability bias. Availability bias refers to the fact that people often

make judgments about the probability of events by how easy it is to think of examples in your memory. We’re influenced by how recent the memory is or how emotionally charged the event is. For Question 1, if you couldn’t think of recent examples of a young person experiencing a disability, you probably underestimated the probability. For Question 2, an illness often has less emotional impact on memory than an accident (because accidents are sudden, unforeseeable and unusual), which may have led you to overestimate the threat posed by accidents compared to illnesses.Now you know!Any thoughts about how you judge your own insurance risk? Questions about disability insurance? Let us know in the comments below or at