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Important differences between workers’ compensation and disability insurance

Income security is incredibly important for American workers today. Wages lost due to injury can burden families while medical debt can be financially catastrophic. Thankfully, there are several programs intended to protect workers during these times.

Depending on the workplace, employers are likely required to purchase workers’ compensation insurance. This ensures employees who sustain injuries on the job receive coverage for medical expenses and lost wages. Individuals may also secure private disability insurance, which pays out benefits for lost wages no matter how an injury occurs. There are several differences between how these two programs function.

Workers’ compensation insurance is mandatory

In North Carolina, most businesses with three or more employees must purchase workers’ compensation insurance. Disability insurance is a personal choice for individual workers.

Short-term or long-term disability insurance

Disability insurance is available as either short-term or long-term. Short-term insurance covers individuals who cannot work for brief periods of time. It pays out quickly and has a set end-date. Long-term insurance does not pay immediately but could provide benefits for decades. For workers’ compensation benefits, the nature of the injury defines the terms.

Workers’ compensation precludes litigation

Workers’ compensation payouts use a “no-fault” system — workers typically have to waive the right to sue their employer in exchange for benefits. Personal disability insurance requires no such legal stipulation.

Disability insurance is expensive

Several different factors affect the pricing of disability insurance including occupation, lifestyle habits, desired payout and more. This complex calculation may result in premiums costing thousands per year. Employers alone purchase workers’ compensation insurance.

Make the right choice

Over 25% of individuals over age 20 can expect to be out of work for at least a year due to a disability, according to the Social Security Administration. Concerned workers or those dealing with a workplace injury should consider reaching out to a workers’ compensation attorney to assist with paperwork, appeal a denial, and help recover lost wages.