Workers Compensation vs. Short-Term Disability

by Rod Howell ; Updated July 27, 2017

Workers compensation and short-term disability are two types of insurance plans that pay benefits to individuals who are unable to work for temporary periods of time. Benefit payments from both plans cover a percentage of the individuals’ salaries while they are recovering. There are differences between the two as well, including one insurance covering work-related injuries while the other doesn’t.

Workers Compensation

Workers compensation is an insurance program that pays benefits to employees who are injured or become sick while working. Each state has their own rules that determine what companies are required to carry this insurance and what they have to pay in premiums. Typically, benefit payments cover up to two-thirds of the employees’ salaries and are distributed tax free. Most states require companies that have more than four employees to purchase workers compensation insurance.

Benefits of Workers Compensation

Not only does workers compensation pay for lost wages, but it also covers the medical expenses of the injured employee as well. Workers compensation is a no-fault policy which means that employees will be paid no matter who is responsible. Also, injuries and illnesses do not have to occur on company property for employees to receive benefits; they are also eligible if they are injured away on business trips, at client meetings or off-site for a variety of business reasons.

Short-Term Disability Insurance

Short-term Disability, called STD, plans are one of two types of disability insurance coverages available in the United States; long-term disability is the other. STD plans provide benefit payments for individuals who cannot work for temporary periods of time. Policy benefits are paid for a couple of weeks, or up to a maximum of two years, depending on the type of policy purchased. Insureds typically have to let a certain waiting period pass before they are able to receive benefits. Waiting periods can last for several days to several weeks. Also STD insurance plans do not cover work-related injuries or illnesses.

Benefits of Short-Term Disability Insurance

STD policy benefits vary from insurer to insurer, but most plans replace between 40 and 66 percent of the insureds’ income, according to the Life and Health Insurance Foundation for Education. Short-term disability coverage is offered by 50 percent of employers in the United States, but workers can buy STD policies directly from insurance companies as well. There are a wide range of illnesses and injuries that are covered by STD plans, including back injuries, cancer treatment and maternity leave.

Warning

Although no one is at fault when it comes to workers compensation cases, if it is found that an employee was under the influence of drugs or alcohol during the incident, or her injury was self-inflicted, her claim for benefits is forfeited. As stated earlier, neither insurance plan covers a worker's entire salary while he is recovering from his illness or injury. This is to prevent malingering by an employee who wouldn’t have any incentive to get back to work as quickly as possible if his income was paid in full.