People who are unable to work because of an injury or illness often have more than one source of income replacement available. The two most prevalent types of insurance are Workers’ Compensation and Long Term Disability (LTD) insurance. While both are intended to replace lost wages, they have different legal structures, cover different situations, and have different responsibilities for claimants. It’s important to know these differences so you can understand which benefit applies, and to avoiding gaps in coverage.
What is Workers’ Compensation?
Workers’ Compensation is a state-mandated insurance program that pays benefits to employees who are injured or become ill from their job. Coverage includes injuries resulting from an accident at work or occupational illnesses that are caused by the nature of the work, like repetitive stress injuries or exposure-related diseases. Workers’ Compensation is a no fault system, that is, the employee isn’t required to show that the employer was negligent to receive benefits, and in most jurisdictions, the employee’s own negligent actions do not preclude them from receiving benefits unless in limited situations, such as when the employee is intoxicated or intentionally injures themselves.
Typical Workers’ Compensation Benefits Include:
- Medical benefits: Payment for reasonable and necessary medical treatment for the work injury or illness.
- Wage replacement: This is a partial replacement of the employee’s lost wages, usually expressed as a percentage of the employee’s average weekly wage, capped at a maximum amount determined by the state.
- Vocational rehabilitation: Retraining or therapy services when the employee is not able to return to the previous job.
- Permanent disability benefits: Extra benefits in cases of permanent partial or total disability, based on state schedules.
The percentage of wage replacement, caps on benefits, filing deadlines, and procedure for Workers’ Compensation vary from state to state, as it’s a state-level program. Claimants must report a work injury to their employer within a certain time limit (usually days or weeks) and submit a formal claim to the state Workers’ Compensation board or commission.
What is Long Term Disability Insurance?
Long Term Disability insurance is a type of insurance that provides a percentage of income replacement if a person is unable to work because of a non-occupational injury or illness. LTD coverage is usually offered as part of an employer-sponsored benefits plan, and may be subject to the Employee Retirement Income Security Act (ERISA), or an individual may have a private LTD policy.
LTD insurance is not job-related like Workers’ Compensation and doesn’t require the disabling condition to be related to the claimant’s work. LTD claims often arise when a person has a condition like cancer, cardiovascular disease, autoimmune disease or psychiatric disease that prevents them from working, no matter where or how it developed. LTD policies generally pay 50-80% of pre-disability income and only pay benefits after a period of time known as the elimination period, which is usually 90-180 days, where the claimant must remain continuously disabled. Benefits can be paid for a fixed period of time or until retirement age, depending on the policy.
Key Differences Between the Two Programs
Eligibility: Workers’ Compensation only covers injuries and illnesses that occur during and while working. LTD is for disabilities that are not work-related, and many LTD policies do not cover injuries covered by Workers’ Compensation.
Medical Coverage: Workers’ Compensation benefits cover both medical expenses associated with the covered injury, in addition to wage replacement. LTD will pay wage replacement benefits only and medical costs will be paid by health insurance or other coverage.
Claim Process: A Workers’ Compensation claim includes the requirement to provide timely notice to the employer, filing a claim with the state Workers’ Compensation authority, and possibly communicating directly with the insurance carrier of the employer. An LTD claim is filed with the insurance company that underwrote the policy, and must be supported by medical evidence to substantiate the claimant’s disability as outlined in the policy.
Duration of Benefits: Workers’ Compensation benefits are generally paid until the employee can return to work, or until they reach maximum medical improvement, at which point permanent partial or permanent total disability benefits may be paid depending on the degree of disability. Whereas, LTD benefits begin once the elimination period is over, and continue for a certain number of years or until retirement, depending on the policy, as long as the disability continues.
Fault and Causation: Workers’ Compensation does not require proof of fault, but does require proof that the injury was sustained while working. LTD doesn’t require proof of fault or occupational causation, but in order to qualify the claimant must meet the definition of disability in the policy, which can change from an “own occupation” to an “any occupation” standard.
Can an Individual Receive Both Benefits?
Workers’ Compensation and LTD are not mutually exclusive. It is possible to receive both, although LTD policies frequently coordinate benefits through offset provisions. Many LTD policies include offset clauses which limit or even exclude LTD benefits when the claimant is also receiving Workers’ Compensation benefits for the same disability. If a claimant thinks they might receive both types of benefits, they should read the offset language of their LTD policy carefully and, if applicable, consult with a lawyer before assuming that both sources of income will be available at the same time.
The Importance of Legal Guidance
There are strict deadlines, documentation requirements and, especially in the case of ERISA governed LTD plans, limited time periods for internal appeal before litigation is an option in both Workers’ Compensation and LTD claims. Claims in either category are often denied or underpaid and claimants are not always aware of the extent of benefits to which they may be entitled. A lawyer who is knowledgeable about Workers’ Compensation and disability insurance law can determine which type of claim is appropriate, make sure that deadlines and notice requirements are adhered to, and represent the claimant during the review or appeal process.
Conclusion
Workers’ Compensation and Long Term Disability insurance serve related but distinct purposes. Workers’ Compensation is a state-regulated, generally no-fault system addressing work-related injuries and occupational illnesses. LTD insurance is contractual coverage that provides income replacement when an insured person satisfies the policy’s definition of disability, regardless of whether the condition is work-related, subject to the policy’s terms, exclusions, and offset provisions.
