Most employees are unprepared to fully cover key financial risks they face during their working careers, The Prudential Insurance Company of America has found.

Prudential says much attention has been given to the financial risk of outliving one’s assets in retirement, but many employees underestimate three more immediate risks—loss of family income due to a premature death, loss of income due to illness or injury, and out-of-pocket health care and other expenses—which could cripple their financial outlook. Employees that are not adequately protected against these risks may need to start paying their day-to-day expenses by incurring credit card debt, using lines of credit, or taking loans from their employer-sponsored retirement plans, the company contends.

Prudential, with supporting research and analysis provided by Ernst & Young, developed a new “Prutection Score” metric to help employers evaluate the financial wellness needs of their employee populations. For each risk, the Prutection Score gauges how financially prepared employees are should a risk event occur by looking at the resources available to them, such as personal funds and insurance coverage, relative to the resources needed.

In developing the Prutection Score, Prudential conducted a financial wellness survey of more than 5,000 employees who had medical insurance. Drawing on data from that survey, as well as various government and industry sources, Prudential developed national benchmark scores.

The benchmark Prutection Scores indicate:

• In the event of loss of income due to premature death, the average employee would be able to cover 71% of ongoing financial needs for a spouse’s or partner’s lifetime and for children until adulthood.
• In the event of loss of income due to illness or injury, the average employee’s household would be able to pay 71% of their monthly expenses using other income sources, such as spousal or partner income and disability insurance benefits.
• Faced with out-of-pocket medical and non-medical expenses due to a critical illness or accident, the average employee’s household is equipped to cover just 48% of those expenses through liquid savings and insurance coverage.

While about one-third of employees in the wellness survey score high—90 or higher—in each risk category, only 4% score above 90 for all three risks, and only 2% have scores of 100 or more for all three. Prudential also found that for each risk category, Prutection Scores vary dramatically from one demographic group to another.

“These findings suggest that employers have a real opportunity to help improve their employees’ financial health through targeted, needs-based financial wellness programs, which educate employees about the financial risks they face and provide the tools they need to help manage them,” Prudential says in a white paper called “Financial Wellness: The Next Frontier in Wellness Programs.”   

Prudential surveyed 5,335 individuals between March 5 and April 2, 2014, using Harris Online Panel.