Two types of insurance can keep you financially stable when an illness or injury affects your ability to work: disability coverage and workers’ compensation. These are two different things that can be confused. They serve different purposes and when combined, they provide a stronger safety net to both employees and business owners.
Understanding how to combine these two types of coverage will be more important in 2025 as the workplace injury patterns continue to evolve, and as remote and gig-work continues its rise.
Basics of Workers’ Compensation
Workers compensation (or workers comp), is a state mandated insurance program which provides medical and wage replacement benefits for employees who are injured or ill at work. Workers’ compensation can help cover the cost of treatment and lost wages for employees who are injured or become ill on the job.
Workers’ compensation is only applicable to work-related accidents. If you’re injured off the clock or diagnosed with a condition that isn’t work-related, you’re on your own, unless you have disability insurance.
Filling the Gaps in Disability Insurance
Disability Insurance covers nonwork-related injuries or illnesses that prevent someone working. Workers’ compensation will not apply if, For example, if an employee develops a chronic condition like multiple sclerosis or is injured in a car accident outside of work, workers’ comp won’t apply, but disability insurance will.
There are two main types:
- Short-Term Disability Insurance (STD).: Covers a few weeks up to several months.
- Long-Term Disability Insurance: Provides coverage for a long period of time, up to retirement age, depending on the policy.
Why you need both in 2025
With mental health claims on the rise, a growing gig economy, and more remote workers in play, traditional protections like workers’ comp aren’t enough. Here’s why both forms of coverage are important in 2025:
Off-the Job Risks: Back pain from poor home office setups, mental burnout, or injuries from weekend sports don’t qualify for workers’ comp, but they can still sideline an employee. Disability insurance ensures they don’t lose all income during recovery.
The Changing Workforce models: Freelancers and 1099 workers are often ineligible for workers’ compensation. They can purchase personal disability insurance.
Increasing Medical Costs: Workers’ compensation often covers medical costs, but wages are limited. Disability insurance can offer a better income replacement ratio, particularly for high-earners or executives.
Mental health & “invisible” conditions: Workers compensation can be difficult to claim for anxiety or depression, unless they are clearly linked to the workplace. Disability insurance could be more flexible in the future, especially with updated underwriting criteria in 2025.
Example
Let’s assume Maria is a marketing professional. She breaks her ankle while jogging on a weekend and misses two months of work. She is not eligible for workers compensation because the injury did not occur at work.
However, if she has short-term disability coverage from her employer, she will receive a portion of her salary during her recovery. This gives her the peace of mind she needs.
Why Employers Should Offer Both
Employers who offer both workers’ comp and disability insurance have a well-rounded benefits package, which attracts talent and helps reduce turnover. This shows that the company is concerned about the employees’ well-being, both at work and outside of it.
Businesses that offer disability coverage could also qualify for tax incentives and reduced liability due to the new compliance updates in many states by 2025.
Summary: Stronger Together
Disability insurance and workers’ compensation serve complementary but distinct roles.
- Workers compensation: Covers work-related illnesses or injuries
- Disability Insurance: Covers off-the-job conditions or injuries
Together, these policies offer employees and employers a greater level of protection. Combining these policies in a workforce that is constantly changing is not only a smart decision, but it’s also essential.
Need Help Selecting the Right Coverage?
Keen Coverage specializes in customizing insurance solutions for companies of all sizes. Our experts can help you add disability insurance to your benefit plan or compare policies for your entire team.
Contact us today for a complete protection of your employees, wherever and however they work.