All business owners have an obligation to protect their staff members. However, there’s no way to completely mitigate the risks of injuries in the workplace, regardless of the industry. Fortunately, policies like workers compensation and disability insurance make it possible to safeguard an employee’s livelihood in the event of an accident. Insurance policies like these are essential to protecting both the worker and the business. Nevertheless, not all policies are built the same, so let’s review some of the key differences between workers compensation and disability insurance.
Differences Between Workers Compensation and Disability Insurance
Both workers compensation and disability insurance provide partial financial assistance to employees unable to work due to injury or illness, so the policies are pretty easy to confuse. However, there are two main differences between them:
- Workers Compensation: This policy specifically covers injuries and illnesses that happen on the job with the notion that the employee will eventually resume full-time duties.
- Disability Insurance: This policy provides financial assistance for injuries or illnesses that don’t necessarily need to happen on the job but tend to result in long-term or permanent disabilities.
However, to better inform your insurance decisions as a business owner, it’s important to iron out the details of each policy.
What Does Workers Compensation Cover?
If you’re a business owner operating in Massachusetts – or most other states – workers compensation is required to run your business. Even if you’re in a state where this policy isn’t necessary, you’re responsible for covering the expenses for job-related injuries – the costs of which would far exceed the cost of insurance. The following are some additional benefits provided by workers compensation:
- Medical Costs: Workers compensation covers the medical expenses and any ongoing treatment required for the employee’s injury.
- Liability Coverage: Your business will have liability protection from lawsuits by the injured party.
- Lost Wages Reimbursement: This policy will partially cover the employee’s lost wages up to the policy’s limit.
After learning of an injury, you’re required to offer your worker a policy claim form (known as a DWC-1) within 24 hours and record the date and time of the injury, where it occurred, how it happened, and the employee’s symptoms.
What Does Disability Insurance Cover?
Beyond the shared goal of providing assistance to injured employees, disability insurance differs from workers compensation in a lot of ways. The injury or ailment doesn’t need to occur on the job to trigger coverage, and the benefits provided are divided into short-term and long-term disability – spanning from days or weeks to decades. The benefits of each subset of this policy include:
- Short-Term Disability: Short-term disability coverage will usually cover 40% to 60% of your employee’s monthly income, and the benefits typically last three to six months – though some policies can last up to two years.
- Long-Term Disability: If an employee incurs a severe injury or ailment that prevents them from returning to work, this policy will usually cover 60% to 80% of their monthly income up for a set number of years (i.e., ten years) or up until they turn 65.
Unlike worker compensation, disability insurance is typically optional, used as a means to improve staff appreciation and retention. Some employees may even choose to supplement their employer-paid plan with disability insurance of their own.
Now that you’re aware of the differences between workers compensation and disability insurance, you can make informed decisions on behalf of your business and employees. By enrolling in policies aimed at protecting your staff’s livelihood from injuries and illnesses, not only will you be protecting them, but you’ll witness greater employee satisfaction. At TJ Woods Insurance, we can help you find affordable workers compensation, disability insurance, and any other necessary business policies. If you’re looking to safeguard your business and team, contact us today.
