Workers Compensation or Disability Benefits

Many people do not know the difference between Workers’ Compensation and disability insurance. Workers’ Compensation is paid for by your employer. The US Department of Labor requires that all employers carry some form of Workers’ Compensation insurance. Most Workers’ Compensation plans are bought through private insurance companies.

Private insurance companies sell Workers’ Compensation plans to employers. Usually the premiums are high and employers see this as a cost of doing business. For those employers that do not buy workers’ compensation plans, there are secondary funds in states designed to protect the injured worker. For those employers that choose not to follow the law, heavy fines are imposed.

When an employee is injured on the job, there is usually a time frame for filing a Workers’ Compensation claim. An injury should be reported to the insurance company as soon as possible. The governing state Workers’ Compensation board typically must have official filing or notice of employee injury.

Workers’ Compensation acts like an insurance policy in that it pays an employee for medical expenses and time lost from work as a result of his/her injury. Of course, in most circumstances, the policies are only required to pay 2/3 of an employee’s gross earnings. If an employee is injured and they do not miss time from work and their medical expenses are under $1,000, then in most cases the employer can opt to pay the bills themselves, thus limiting the possibility their premiums will rise.

Disability insurance is a policy that an employee carries. This can be short term disability or long term disability or both. The employee will usually pay premiums out of their paychecks for said policy. This policy would then pay a certain percentage of their gross wages and other monetary compensation for injuries or illness, whether on the job or off the job.

Any injury that results from a work related accident or incident, should be reported immediately to your employer. Workers’ Compensation law was designed to act as a “no fault” claim where the interests of the employer and the employee are both protected. Once a claim is filed by an employee, that employee gives up their right to legal litigation against their employer for negligence. In turn, the employer is required to pay their insurance company to manage the employee’s medical case to resolution and return to work.

In most cases, both an employer and a Workers’ Compensation carrier will work very closely together to minimize costs. Often times, case managers (or people who manage an employee’s injury) will be assigned. These are professional nurses and/or highly trained specialists in the medical arena. They will coordinate medical care and return to work plans. They will ensure that medical care and treatment is continuous and that ordered treatment is quickly approved to expedite not only employee recovery but eventual return to work.

So, in closing, the major difference between Workers’ Compensation and Disability Insurance is one is funded by your employer through enacted laws and the other is purchased by you. Workers’ Compensation plans typically pay the costs of both your medical care and treatment as well as your lost wages. Disability insurance plans can vary but most cover a certain percentage of your income and/or provide compensation for injuries sustained.

In either case, the insurance plan premiums are paid in the event of an illness or injury. However, not all people will use these plans, like most insurance plans, and thus some profit will be made by the insurance company. As with any insurance, you are purchasing “coverage” that you may or may not need. If you don’t need it, you do not get your money back. However, if you do need it, you’ll be glad you are covered.