Short-Term Disability vs. Workers’ Comp: A Comparison

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Workers’ compensation insurance is required in nearly every state if you have employees. The specifics vary depending on where a business is located. For example, workers’ compensation insurance in Tennessee is required if you have five or more employees. In Florida, if you have four or more employees, you’re required to have workers’ comp insurance. In California, by contrast, every employer is required to have this insurance coverage, even if they only have a single employee. 

While the specific requirements vary in different states, the general concept of workers’ comp tends to be similar across the board. 

This government-mandated program is in place to provide benefits if a worker gets sick or hurt on the job or because of their job. It’s like disability insurance, and it provides a combination of financial benefits and healthcare benefits. 

Workers’ compensation might include partial wage replacement for the time an employee can’t work. There may also be reimbursement benefits for healthcare services related to the illness or injury and for occupational therapy. 

Private insurers will usually pay workers’ compensation programs from premiums that employers pay. 

Every state has its own Workers’ Compensation Board, which is a state agency responsible for overseeing the program in its entirety and also intervening if there are disputes. 

With all this in mind, there tends to be a question from a lot of people as far as the differences in workers’ compensation and short-term disability insurance. We compare the two below. 

What is Short-Term Disability?

It is a form of income replacement. If an employee can’t work for a period of time because of an illness or injury that’s not related to their job, they can experience financial challenges and hardship. The employer also has detrimental effects they experience, including reduced productivity. 

With it, the employee gets a percentage of their earnings pre-disability. Income is replaced on a weekly basis. 

The specifics of short-term disability vary depending on state requirements and the provider

There are usually four types. 

With traditionally, an employer pays for the full premium. With contributory plans, the employer and the employee both contribute to the cost of the benefit, and with core buy-up, employees have the option to buy more coverage if they choose. In voluntary this term of disability, just the employees pay for their disability benefits. 

After an employee is enrolled in an available plan, they’re eligible to receive wage replacement of anywhere from 40-70%. There is a monthly benefit maximum in some instances in this term of disability coverage. 

The most common reasons for someone to use Its benefits are injuries, accidents, illnesses, and pregnancy or maternity leave. 

The medical condition can’t be related to work or any responsibilities associated with your job. 

An employee can start to receive their short-term disability payments on the first day of their accident, but usually, it’s the eighth day after the filing of a claim when payments start. 

This is temporary, so the benefits can be 12, 26, or 52 weeks. 

The pricing of it depends on the employee’s age and their compensation on a weekly basis.

How Is Short-Term Disability Different from Worker’s Compensation?

While there are similarities between short-term disability and worker’s compensation, there is one big difference. 

Workers’ compensation is coverage specifically for illnesses and injuries that are work-related. It provides coverage for non-work-related injuries and illnesses. 

You typically can’t try and get benefits for both at the same time for the same incident, so as an employee, you have to be careful to make sure you’re applying for the appropriate coverage for your situation. 

If you’re deciding whether you should apply for workers’ comp or short-term disability, you need to simply consider whether your injury or illness was caused directly by your responsibilities at work. 

If your workers’ compensation claim is denied, you might be able to then file for it but this depends on the conditions of your policy. 

If you were to use short-term disability coverage for an injury that was work-related, and then it’s determined later that you should have used your workers’ comp benefits, you could end up having to pay back its benefits. 

Another key difference between these two types of insurance is that workers’ compensation is something that’s almost always legally required, but this term of disability tends to be optional. 

What About Long-Term Disability?

Long-term disability insurance is another type of special insurance protecting your ability to have an income if you’re in the midst of a serious injury or illness. It’s not something you use if you’re out of work sick for a week. Rather, long-term disability insurance, like short-term coverage, is for conditions that keep you out of work for extended time periods. 

Long-term disability might have an elimination period of 90 days for standard policies, but you can opt for a longer elimination period if you want lower premiums. Long-term disability might cover 60-80% of lost wages, and it can provide coverage for 2, 5, or 10 years. There are even policies with lifetime coverage. 

With long-term disability insurance, benefits continue until you’re medically cleared to return to work or you’ve exhausted the benefits of your policy. 

Qualifying for long-term disability is more challenging than the process of qualifying for short-term disability. Its benefits can be awarded if you aren’t able to perform your job, but with long-term disability, you’re usually only awarded benefits if you can’t do any job. 

What would be characterized as a qualifying event outlined in a policy? Examples of qualifying events include cancer treatments, chronic pain, or debilitating injuries or illnesses that last more than 26 weeks. 

If someone could qualify for any other type of income replacement, like Social Security Disability Insurance, their long-term disability policy no longer pays benefits. 

If you have any particular questions on workers’ compensation or disability insurance, it’s best to start by talking to your employer and then going from there. 

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