Protecting income in adversity is a primary goal for every working professional. Workers compensation and disability insurance are two prudent ways to do so. Though both aim to safeguard your income when you cannot work due to illness or injury, they differ in several aspects. What are these? Let’s find out.
What is workers compensation?
Workers compensation is a type of insurance that your employer provides. If you get injured at work or become ill because of your job, the provisions of workers compensation kick in. This insurance covers medical expenses, rehabilitation costs and a part of your lost wages. Depending on the policy’s terms and conditions, it can provide benefits to your dependents in the case of your death due to a work-related incident.
However, note that the coverage for workers compensation insurance is limited to incidents that occur at your workplace or those arising because of job duties. No compensation is provided if incidents happen outside your work.
What is disability insurance?
Disability insurance covers lost income due to any permanent or temporary disability. It helps cover a part of your lost income and provides medical expenses from any accident or illness leading to disability. There are two types of disability insurance, namely:
- Short-term: This type of disability insurance can cover you for a few months to a few years.
- Long-term: This type of disability insurance can cover for several years
Difference between worker’s compensation and disability insurance
The table captures the key differences between worker’s compensation and disability insurance on various parameters:
| Parameters | Workers Compensation | Disability Insurance |
| Coverage source | Provided by employer | Purchased by an individual |
| Coverage scope | Only work-related injuries, accidents, and illnesses | Can cover both work-related and non-work related injuries, accidents, and illnesses |
| Premiums paid by | The employer | The individual purchasing the plan |
| Types | Generally uniform as stated by the law | Short and long-term policies available |
| Legal requirements | Can be mandatory as per the government rules under Workmen Compensation Act 1923 | Optional. Purchase depends on an individual’s choice. |
Making the Right Choice
Both workers compensation and disability insurance have their set of benefits. The choice, however, depends on various factors, including:
If you are into a job that involves considerable risk, you can opt for both workers compensation and disability insurance. As workers compensation is provided by the employer, you need not pay any additional cost for it. While workers compensation can offer financial coverage in the event of any work-related injury or illness, disability insurance can fortify it to a great extent.
- Need for long-term coverage
You can opt for disability insurance if you want long-term coverage against uncertainties arising from non-working due to any disability.
Evaluate your financial obligations and check the impact of not being able to work for a considerable period. If the impact is minimal, you can give disability insurance a miss and vice-versa.
In conclusion
Workers compensation and disability insurance give you peace of mind as you know you are financially covered in any adversity. They help reduce monetary stress and can go a long way in providing financial stability.
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