Workplace injuries and illnesses can happen to anyone at any time. Therefore, employers need to be aware of their options for paying medical bills and lost income for workers who are injured or ill while on the job. When an employee faces a work-related injury or illness, it can have serious financial repercussions.
Employers must understand the differences between workers’ compensation and disability insurance to make the best decision for their business and employees. This article will explain the differences between workers’ compensation and short-term disability insurance (STD), how they work, and which is right for you.
Let’s dive in to help you make the best decision for your business, or you can visit https://cerity.com/workers-comp-vs-short-term-disability/ for more information.
What is Workers’ Compensation Insurance?
Workers’ compensation insurance is a type of insurance that offers medical and income replacement benefits to employees who become ill or injured while working. Workers comp insurance is required in most states, and it helps employers pay for the costs associated with an employee’s injury or illness, which includes:
- Lost wages: In most cases, it covers two-thirds of an employee’s average wages.
- Medical care: It helps cover the costs associated with medical treatments for an employee’s injury or illness, including doctor visits and medications.
- Rehabilitation: The insurance can also help cover the cost of job retraining and rehabilitation services for the affected employee.
- Death benefits: If an employee passes away due to a work-related illness or accident, workers’ compensation may provide death benefits to the remaining family members.
It also provides legal protection against lawsuits from employees.
What is Short-Term Disability Insurance?
Workers who become handicapped due to an illness or accident unrelated to their jobs might replace their income with the help of short-term disability insurance. It usually covers up to six months’ worth of lost wages and can help employees cover their medical and other expenses related to the disability. In most states, there is no legal requirement for short-term disability.
However, it can be an excellent way for employers to provide additional financial protection for their employees and help them stay afloat during difficult times. STDs provide benefits for things such as illnesses, injuries, and pregnancy-related disabilities. It typically covers up to 60 percent of an employee’s salary, and the amount of coverage may vary depending on the policy.
How Do Workers Comp and Short-term Disability Compare?
While both provide financial protection for employees who become disabled due to an illness or injury, there are some key differences between workers comp and short-term disability insurance:
- Workers’ comp covers workplace injuries or illnesses, while STD covers the costs associated with an out-of-workplace accident or disease.
- Most states have laws requiring businesses with one or more employees to offer workers’ compensation insurance, while STD coverage is optional.
- Workers comp is paid for entirely by the employer, while the employer may partially or fully fund STD, sometimes with contributions from employees.
Which One is Good for You?
Your company’s requirements will ultimately determine whether you choose short-term disability insurance or workers’ compensation. If you are a business in a state with legal requirements for workers’ comp coverage, that is likely the best option. However, if you want to provide additional financial security and protection to your employees, short-term disability insurance may be the right choice.
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