Disability vs. Workers Compensation
Many workers are unclear on the difference between disability insurance coverage and workers compensation insurance. Often, workers will decline optional disability insurance coverage, however badly needed - because they think they are covered under their employer's workers compensation plan. This is usually a mistake.
Workers Compensation is designed to protect both businesses and workers from the devastating potential consequences of work-related injuries and fatalities. Under workers' compensation plans, covered workers are guaranteed access to a substantial pool of money that can cover lost income, pay medical expenses (generally with no deductibles or out of pocket costs) and provide for job retraining and physical and occupational therapy services that would be beyond the ability of many employers to pay out of their own pockets. In return, workers give up the right to sue their employers for damages arising from covered incidents. This also helps protect workers, because if they had to resort to lawsuits, the courts could take months or years to resolve claims - and meanwhile the worker may have nothing to live on.
Most state laws require employers to carry workers compensation insurance.
Disability insurance, on the other hand, is designed to protect the insured from loss of income arising from a disability from any covered cause, except for exclusions for disabilities arising from criminal activity or acts of war that would normally be covered by VA or military medical insurance (Tricare).
In the event of a qualifying disability, the disability policy will provide a percentage of pre-disability income, which is normally between 50 and 70 percent. (This benefit is taxable if the employer pays the premiums, and tax-free if the premiums are paid by the insured with after-tax dollars).
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