Certain illnesses or injuries may prevent a business owner or employee from being able to do their work for an extended amount of time.
That’s likely why you’re wondering, “Do I need disability insurance?”
Disability insurance is intended to kick in during these instances. It can replace one’s income during the period in which they are away from the job. This way, they can keep their life together until they are ready to return to work.
Is it the right choice for your company?
Read on and we’ll walk you through what you need to know.
What Is Disability Insurance?
Long-term disability insurance is a kind of business insurance that intends to cover an employee’s income if they had to be away from work for a long period of time.
This differs from worker’s compensation, as it will cover an employee if they were injured or fell ill outside of the workplace.
If this situation occurs, the insurance company would pay a monthly benefit through the business that’s roughly equal to the individual’s income after taxes. This would be paid out until the person is ready to return to work, or the benefits as listed in the plan run out.
This kind of insurance can be a lifeline if the worst were to happen.
Do I Need Disability Insurance?
Of course, having this kind of insurance in place comes with a cost.
Not everyone will be able to afford the kind of policy that one would want to have in place. But is having disability insurance a requirement for a small business?
In most places, no.
Generally speaking, there is no government requirement for a business to have a disability insurance policy taken out. Some states, like New York, Rhode Island, California, and others, do for employers with a certain business size to provide short-term disability insurance.
Instead, almost all states require employees to have a worker’s compensation insurance policy taken out.
This provides insurance and benefits for those who are injured or fall ill on the job itself. Requirements as far as this kind of insurance goes will vary from state to state.
How Do The Two Differ?
There are several differences between worker’s compensation and disability insurance.
The main difference is that they cover opposite scenarios in terms of the injured person’s relationship to work.
Worker’s compensation will cover only injuries or illnesses sustained at work, while the employee was on the clock. Disability insurance won’t cover these injuries at all, as it only covers injuries and illnesses sustained outside of the workplace.
In this way, they cover two opposing sides of the same coin. Generally, worker’s compensation payouts are less than those that would be found in a short-term disability insurance policy.
Getting Disability Insurance for Your Business
“Do I need disability insurance for my business?”
It’s a common question business owners have. The above information should help you come to a decision.
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