What’s The Difference Between Worker’s Comp and Short-Term Disability Insurance?

Contributed by Craig Shapiro, Vice President, Product & Underwriting, Cerity

Proactivity is crucial to running and maintaining a business, and one of the most important proactive steps you can take as a business owner is to ensure you have the right insurance coverage. However, the world of business insurance can be complicated. For example, many business owners aren’t clear on the difference between workers’ comp and short-term disability insurance. That’s because these types of insurance policies are similar. However, it’s important to understand how they’re different. Let’s dive into this often confusing set of policies so that you can know what each does and which is best for your business. 

Workers’ Comp Insurance

Workers’ compensation insurance is a form of business insurance that helps protect businesses, business owners, and employees from the financial impacts of workplace injuries or illnesses. Although laws may vary, most states legally require businesses to provide workers’ comp coverage if they have one or more employees. Workers’ comp insurance provides coverage if the employee is injured or gets sick while doing the required duties of their job. Workers’ comp provides coverage for: 

• Lost wages — typically amounting to two-thirds of the employee’s average income

• Medical care

• Death Benefits

• Rehabilitation

Short-Term Disability Insurance

Short-term disability insurance is a voluntary form of business insurance that helps to replace a portion or all of an employee’s income in the event they experience an injury or illness that is not work-related. Events that may lead to an employee using short-term disability coverage include automobile accidents, illnesses, long-term diseases, or non-work-related incidents that cause injuries that render the employee unable to perform their job responsibilities. Generally, short-term disability insurance is paid partially or in full by the employer. Sometimes employees contribute to their coverage. 

Difference Between Workers’ Comp and Disability Insurance

Although it seems these two forms of insurance are similar, there is a way to distinguish workers’ comp vs. short-term disability. While workers’ comp provides coverage for work-related injuries or illnesses, short-term disability provides coverage even if the injury or illness is not work-related. For example, workers’ comp would not cover injuries caused by a car accident to or from work, but short-term disability would. Similarly, short-term disability would not cover injuries or sickness experienced on-the-job, while workers’ comp would. 

Workers’ Comp and Short-Term Disability Working Together 

Generally, employees cannot seek benefits for both workers’ comp and short-term disability at the same time for the same incident. This means that when an employee is injured, they should be sure to apply for the right coverage for their situation. 

When weighing whether to file for short-term disability vs. workers’ comp, consider whether the injury or illness was caused as a direct result of their job responsibilities or not. Employees should apply for workers’ compensation coverage if they are injured or get sick while working. Short-term disability should be considered for injuries or illnesses that are not work-related. 

In some circumstances, employees can file for short-term disability if their workers’ comp claim is denied, however, this depends on the terms and conditions of their policies. In addition, employees should be careful when utilizing short-term disability for injuries that were work-related. This is because if employees get on short-term disability and it is determined later that they should have been utilizing workers’ compensation benefits, they will have to pay back the short-term disability coverage benefits.

Although short-term disability is often optional, workers’ compensation coverage is usually legally required, making it a top priority for businesses of all sizes.

Craig Shapiro is Vice President, Product & Underwriting for Cerity, a workers’ compensation insurance provider founded with a bold vision to reimagine small- to medium-sized business insurance. With its digital-first approach, Cerity is transforming the entire process to empower business owners to quickly and easily protect their team, assets and livelihood through an online workers’ compensation solution.