Disability Insurance vs. Worker’s Compensation

workers compensation and disability insurance

What if one of your employees breaks an ankle while on the job and will have to be out of work for a few weeks while it heals. Or, what if an employee becomes ill and will need to take time away from work to recuperate. Disability insurance and worker’s compensation benefits are offered to employees to provide them with monetary payments while they are out of work, but determining which benefit applies and when can sometimes be a bit tricky.

The Small Business Chronicle offers a great explanation of the difference between disability insurance and worker’s compensation:

“… the latter [worker’s compensation] pays for work-related injuries. Employers purchase worker’s compensation insurance to pay for incidents that occur on the job… Disability insurance, on the other hand, pays a portion of the worker’s earnings if he cannot perform job duties because of an illness or injury. Unlike worker’s compensation insurance, an employee pays an insurance premium toward disability insurance through an employer-sponsored benefit plan.”

Disability insurance provided through an employer-sponsored benefit plan usually comes in two types of policies – short-term and long-term – both of which provide a source of income for individuals when the illness or injury is not work-related.

Short-term disability usually requires the policyholder to wait between zero and 14 days before they can receive benefits, with benefits only available for a maximum of two years.

A long-term policy generally requires the policyholder to wait several weeks or even a few months before they receive their benefits. The length of time that a policyholder can obtain the benefits can range from a few years to a lifetime.

Worker’s compensation, on the other hand, not only supplements a worker’s income when they are out of work because of a work-related injury or illness; it also provides medical treatment for the injury or illness. The benefits are generally paid temporarily while the worker is out of work, according to the Small Business Administration.

The National Academy of Social Insurance further explains that while the terms and levels of worker’s compensation benefits vary from state to state, “state laws require employers to obtain insurance or prove that they have the financial ability to carry their own risk” and that this form of insurance is almost always financed by employers exclusively.

Are you looking to revamp the disability insurance and worker’s compensation insurance benefits you offer your employees? Contact Lamb Financial Group at 1-866-481-5262 to learn more about our insurance options.

Image courtesy of Stuart MilesFreeDigitalPhotos.net

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