Workers’ Comp vs Disability Insurance: Which is Better for Your Situation?

Compare the benefits of workers’ compensation to Social Security Disability Insurance. Find out which is better for your situation.

If you are injured in the workplace, you’ll file a workers’ comp claim and receive coverage of your medical expenses and weekly benefits for lost wages.

Disability insurance comes into play if you are injured outside of work, but the injury prevents you from doing your normal job.

The Social Security Administration (SSA) provides disability benefits via Social Security Disability Insurance (SSDI). Your employer may also offer optional short and long-term disability benefits to employees.

Disability insurance may pay for certain medical expenses, but it mostly compensates a worker on a monthly basis for a percentage of their salary.

There are advantages with workers’ comp benefits when compared to disability insurance. For example, workers can more easily and quickly receive workers’ comp, and it may pay them more. Applying for disability coverage through private insurance or through the SSA can be time-consuming and complicated.

Comparing Workers’ Comp to Social Security Disability

Workers’ Compensation Benefits

Workers’ comp benefits are paid to workers injured on the job. Workers’ comp covers medical expenses for the work-related injury and wage replacement benefits.

To receive benefits, you must file a workers’ compensation claim with your employer’s insurance company, and supply proof that your injury was work-related.

Worker’s compensation wage benefits are not taxable income.

If an insurer denies your claim, you have the right to appeal the denial.

Social Security Disability Benefits

Social Security pays permanent disability benefits to workers who become unable to work in any capacity, if they qualify.

Social security disability payments are managed by the Social Security Administration (SSA), a federal government agency. You may qualify for Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI).

Social Security Disability Insurance (SSDI)

While you may eventually qualify for Medicare or Medicaid, SSDI does not cover medical treatment.

SSDI pays benefits provided you worked long enough and paid Social Security taxes on your earnings. Payments convert to regular Social Security benefits when you reach full retirement age.

Unlike workers’ comp, SSDI payments are taxable income.

Supplemental Security Income (SSI)

As with SSDI, SSI provides financial support if you become totally disabled and expect to be disabled for at least 12 months.

The main difference between SSDI and SSI pertains to eligibility. SSDI is provided to those that have paid Social Security taxes. SSI is given to those who don’t qualify for SSDI and have limited means.

In other words, the Social Security Administration provides SSI to low-income people who have not worked enough to qualify for SSDI.

SSI payments are non-taxable and paid monthly. The amount depends on your income.

Eligibility Differences for Worker’s Comp and SSDI

There are big differences in potential eligibility for workers’ comp compared to Social Security Disability Insurance (SSDI).

Eligibility for Worker’s Compensation Benefits

Employees injured on the job will have easier access to workers’ compensation benefits than to SSDI. Employees injured outside of work will not be covered by workers’ comp insurance.

Workers’ compensation is a no-fault insurance program, meaning the employee doesn’t have to show that their employer or co-worker caused their injury.

Workers’ compensation laws exempt certain employees from receiving workers’ comp insurance benefits.

Workers ineligible for worker’s comp include:

Eligibility for Social Security Disability Insurance

Eligibility for social security disability insurance can get complicated.

The SSA funds social security disability insurance with taxes paid by employers and workers. Only employees that have earned enough credits will qualify for SSDI benefits.

You can qualify for SSDI provided that you earned 20 or more quarters of coverage in the last ten years that you were fully employed.

If you earned enough quarters, then before you fully qualify for benefits, you’ll have to show that your condition meets Social Security’s definition of “disability.”

Under the agency’s definition of “disability,” you’ll have to show, at the least, that your medical condition is severe and will last for a minimum of 12 months. You’ll also have to prove that your injury or condition significantly limits your ability to do basic work-related activities, such as lifting, standing, walking, sitting, or remembering.

You are not considered disabled by the SSA if your average 2021 monthly wages are more than $1,310 per month.

Eligibility for Private Disability Benefits

Employers often offer private short-term or long-term disability plans. The employer might pay the premiums, or deduct the premiums from your paycheck.

If you’re trying to receive benefits from a private disability insurance plan, eligibility is determined by the specific insurance policy. In general, most policies require showing that you suffered a personal injury outside of work. You’ll also have to prove that you can’t perform your work duties because of the injury.

Specific Workers’ Comp and Disability Benefits

Injured workers might wonder which benefits are better, workers’ comp or SSDI. While the answer depends on your injury and employment situation, workers’ compensation benefits have certain advantages not found in Social Security benefits.

Workers’ Comp Disability Benefits

Workers’ comp benefits include payment for your medical expenses and lost wages.

State workers’ compensation laws typically don’t cap medical expenses. Further, workers’ comp pays for medical expenses until a worker has recovered from their injury or waived medical benefits in a cash settlement.

Types of Workers’ Comp Disability:

Temporary Total Disability (TTD) refers to an injury that renders a worker unable to return to work for a limited amount of time.

TTD benefits are most often paid as a percentage of a worker’s weekly wage. Most states use a percentage of 66 2/3 percent. A worker usually will continue receiving TTD benefits until they return to work, reach their Maximum Medical Improvement (MMI), or state law says that the benefits should expire.

Temporary Partial Disability (TPD) refers to an injury that limits a worker from performing some, but not all, of their work duties for a limited amount of time.

With a TPD, you can usually return to work with physical restrictions, like “seated work only” or reduced hours. If you lose pay by returning to work with medical restrictions, TPD benefits will compensate you for the difference between your wages before your injury and the wages in your restricted capacity.

These benefits typically end when you return to work at full pay, or state law says that the benefits end because you’ve reached a certain number of allotted weeks.

Permanent Total Disability (PTD) refers to an injury that renders a person unable to return to the workforce, for their current employer or another employer.

PTD benefits provide qualified workers a percentage of their weekly wages for the rest of their lives. In some states, PTD benefits end when you become eligible for full Social Security retirement benefits. Injured workers may opt to settle for a lump sum, with or without continuing medical benefits.

Permanent Partial Disability (PPD) refers to an injury that partially impairs a worker’s ability to work in the future.

As with a PTD, a worker with a PPD suffers a disability for the rest of their life. But unlike with a total disability, a person can return to work with a partial disability. Workers may opt to settle for a lump sum, based on a medically determined permanent impairment rating for the affected body part.

Social Security Disability Benefits

SSDI does not pay for your medical bills. However, you may qualify for Medicaid if your household income is low. Recipients can get Medicare after a 24-month waiting period. In the interim, you may be eligible for reduced-cost health insurance through the HealthCare.gov marketplace.

SSDI benefits pay a monthly benefit so long as you are disabled, or until you reach your full retirement age.

The Social Security Administration will determine your payment based on your lifetime average earnings before you suffered your accident and became disabled. These are your earnings at jobs where your employer took money out of your wages for Social Security tax purposes.

SSDI payments range on average between $800 and $1,800 per month. For 2020, the maximum benefit you could receive was $3,011 per month. The SSA has an online benefits calculator that you can use to obtain an estimate of your monthly benefits.

There is a five-month waiting period for SSDI, so you will be paid in the sixth month after you became disabled.

Employer-Based Disability Benefits

Most employers offer both short and long-term disability insurance to their employees.

Short-term disability usually pays you a percentage of your base salary (excluding bonuses and commissions). Depending on your particular coverage, you could receive these payments for a few weeks or up to a year.

Long-term disability coverage pays you for a portion of your base salary for a longer period of time. The exact amount of your payments and their duration will vary depending on your policy.

Receiving Both Types of Benefits

As a general rule, workers can receive both workers’ compensation and disability benefits at the same time. However, you may not want to depending on your situation, injury, and other facts of your case.

If you receive workers’ comp and then start receiving disability benefits, the SSA will reduce your benefits because of the workers’ comp benefits. The same applies if you were to receive disability benefits first and then start receiving workers’ comp. Your employer’s insurer will reduce your payments because of the other benefits.

According to the Social Security Administration, if you receive workers’ comp or some other public disability benefit and SSDI benefits, the total combined amount of all benefits can’t exceed 80 percent of the earnings you enjoyed before your injury.

If you receive benefits under your employer’s insurance and then start receiving workers’ comp or SSDI benefits, you’ll likely have to pay back a portion of the short or long-term benefits you received.

Contacting an Attorney for Help

If you were injured on the job and wish to pursue workers’ compensation benefits, you can probably do so without speaking with a workers’ compensation attorney. If your injury or occupational illness was severe, then you may want to speak with a lawyer for help.

Since disability benefits are more complicated than workers’ comp benefits, you’ll likely want to speak with a lawyer before applying for them. A lawyer can help inform you of the applicable disability laws that apply to your case and what disability benefits you may find at your disposal.

An attorney can also advise you on whether it’s a good idea in your case to receive benefits from more than one source.

Most workers’ compensation and disability attorneys provide free consultations. A free consult means you can get all of your legal questions answered for free.

Speak with a lawyer today to help get the compensation you deserve.

Dustin Reichard, Esq. is an experienced attorney with 20 years of work in the legal field. He’s admitted to the Illinois State Bar and the Washington State Bar. Dustin has worked in the areas of medical malpractice, wrongful death, product liability, slip and falls, and general liability. Dustin began his legal career as a JAG... Read More >>