In most countries across the globe, businesses are required to protect their employees against different things and eventualities. Some of the protection benefits that employees are supposed to be provided with are disability income insurance and workers’ compensation.
These plans are crucial in supporting business owners and their employees in case of illnesses or injuries that prevent them from working. They ensure that the affected individual can still receive payment even though they are not working.
However, disability income insurance and workers’ compensation are two different plans. Every employee and business owner needs to understand what each one of them is and what they need to get covered.
Disability Income Insurance Vs Workers’ Compensation
Many people do not understand the differences between disability income insurance and workers’ compensation. The only similarity between the two is the fact that they provide financial assistance to workers and business owners when they are not able to work due to illnesses or injuries.
That notwithstanding, disability income insurance provides financial assistance to people who get illnesses or are injured from outside their workplaces. The workers’ compensation is used to cover those that fall ill or are injured from their places of work.
They are both income protection covers for workers. Income protection might differ from one country to another.
For instance, income protection insurance for Australian workers requires that workers are paid up to 85% of their pre-tax income while that for American workers covers up to 75% of their annual income to a maximum of US$144,000.
That being said, you will need to look at different factors before you can decide on the disability income insurance and workers’ compensation that best suits your business. You also need to understand what to do in case your claim is denied.
Disability Income Insurance
As discussed above, disability income insurance covers workers and employees for illnesses and injuries that occur from outside their workplaces. The coverage is usually categorized into two – long-term and short-term disability.
The benefits can be provided for a number of days, weeks, years, or even throughout the individual’s life depending on the plan and their levels of injuries or illnesses.
However, businesses are not required by law to provide disability income insurance. This cover is optional. Most businesses prefer providing short-term disability income insurance compared to long-term disability income insurance.
That notwithstanding, some employees choose to supplement the disability income insurance provided by their employers with plans from other companies. This is important in making sure that one has enough financial assistance when the need arises.
Most developed countries have made it a requirement for businesses to provide workers’ compensation to their employees.
This is financial assistance that is offered to employees and business owners in case they are not able to work due to illnesses and injuries that occur at their places of work.
Businesses that do not provide this compensation might be held liable when their employees are injured or fall ill while at work. In some cases, these costs might be very expensive especially when it comes to ongoing treatments, even more than the cost of insurance.
Workers’ compensation is vital to businesses especially when looking at things such as;
- Reimbursing a worker’s lost wages until they recover and are able to work.
- Covering a worker’s medical costs – including ongoing or emergency treatments.
- Providing businesses with liability protection in case of lawsuits from their workers.
If you run your business in countries that require you to provide workers’ compensation but you do not, you might face lawsuits from your workers or even face fines from regulators.
As an employer, you also need to ensure that your workers understand all their legal rights as well as all the required safety and health precautions.
In case of illnesses or injuries, the businesses are supposed to ensure that the affected worker has a claim form within a maximum of twenty-four hours.
All workers should also be aware of the insurance company that the business is using and how they can report illnesses or injuries.
Finally, it is important to note that disability income insurance and workers’ compensation do not pay the affected individual all their salaries when they are not working. They are made to only provide financial assistance to the affected individuals when they are not able to work.