Disability compensation systems

Both workers compensation and long term disability insurance provide financial compensation for workers who are unable to work, but there are several differences between the two. Workers compensation only covers work related injuries, while long term disability covers loss of work due to illness, injury or accident that is non work related. 

In addition to replacement of lost wages, workers compensation also provides a medical benefit for the work related injury. Long term disability only covers a portion of the lost wages, typically 50-70%, and begins after a significant waiting period, usually 3-6 months. 

Workers compensation is mandated to be paid by the employer. Long term disability insurance is usually provided by employers as part of a benefits package and can be paid by the employee, employer, or they may each pay a portion. If an employer does not offer LTD it can be purchased from an agent. LTD that is purchased from an agent is not taxed, whereas LTD as part of a benefit package is.

Long-Term Disability Income Insurance: Insurance issued to an employee, group, or individual to provide a reasonable replacement of a portion of an employee’s earned income lost through a serious prolonged illness during the normal work career.

Workers’ Compensation: An insurance program that provides medical benefits and replacement of lost wages for persons suffering from injury or illness that is caused by or occurred in the workplace. It is an insurance system for industrial and work injury, regulated primarily among the separate states, but regulated in certain specified occupations by the federal government.