Workers’ compensation disability coverage helps provide important benefits to employees with a work-related injury or illness. It can help with:
- Medical treatment costs
- Permanent disability benefits
- Temporary disability benefits
- Wage replacement benefits for lost workdays
- Death benefits, including benefits for dependent children
Requirements for workers’ compensation disability insurance vary by state, so be sure to review your
state workers’ comp rules.
Workers’ comp disability benefits apply to work-related injuries or illnesses and typically pay for a portion of an employee’s wages soon after a claim is approved. Social Security Disability Insurance, by contrast, is a federal program that supports people who can’t work for at least 12 months due to a qualifying medical condition, regardless of where it occurred, with benefits based on work history and average lifetime earnings.
SSDI is one of several public disability benefits, and when individuals receive workers’ comp and disability benefits at the same time, total payments are typically capped. If your workers’ comp payments and SSDI benefits together add up to more than 80% of what you earned before you were injured or became ill, your SSDI benefit is temporarily reduced.1 Once your workers’ comp benefits end or decrease, your SSDI benefit is typically adjusted back up, as long as you’re still eligible.
Workers’ Comp Disability vs. Impairment
When reviewing a workers’ compensation claim, it helps to understand the difference between an impairment and a disability. An impairment refers to a medical condition that affects how the body functions after a work-related injury or illness. It’s a clinical assessment made by a doctor and can be physical or mental. A disability looks at how an impairment affects an employee’s ability to perform their job or earn wages.
Impairments can be temporary or permanent. These are two classifications that employers should know:
- Permanent impairment means your employee has reached maximum medical improvement (MMI) and is unlikely to significantly improve within one year.
- Temporary impairment is for injuries or illnesses that are expected to heal over time. In these cases, your employee’s doctor would not tell them they’ve reached MMI.
Whether an impairment results in a disability – and what benefits may apply – will depend on how the injury impacts the employee’s ability to do their job. In some cases, workers’ compensation benefits may be paid as weekly wage-replacement benefits. In other situations, a claim may be resolved through a lump sum settlement due to the nature of the injury and the applicable state laws.
Similar to
retirement and workers’ comp, employees may quality for Social Security Disability Insurance benefits in addition to workers’ compensation benefits. While it’s possible to receive both, federal rules may limit the total amount an employee can receive at one time. Understanding how these benefits work together can help employers navigate claims with confidence and clarity.
When an employee has a work-related injury or illness, the workers’ compensation agency in their state will assign them a disability rating based on a numeric rating chart. This rating is shown as a percentage to indicate their level of disability and reflects how much the injury permanently affects the employee’s ability to function. The percentage also helps determine the amount of
workers’ compensation insurance benefits the employee may be eligible to receive.
For example, an employee with a spinal injury that causes ongoing pain even after treatment could be assigned a 65% disability rating. This rating generally reflects a serious, permanent loss of function but not a complete inability to work. Keep in mind that exact criteria and benefit calculations vary by state.
Other terms doctors use to determine a patient’s degree of disability include:
- Mild, which usually means 25% disabled
- Moderate, which usually means 50% disabled
- Marked, which usually means 67% disabled
- Total, which usually means 100% disabled
To assign ratings, doctors refer to “AMA Guides to the Evaluation of Permanent Impairment.” Workers’ compensation systems use this guidance to accurately rate injured workers. While most states rely on the AMA Guides to evaluate permanent impairment, these eight states provide their own state-specific guides for assigning workers’ compensation disability ratings:
