How Disability Insurance Differs From Workers' Compensation

Workers' compensation only pays when an injury or illness happens on the job. Disability insurance pays regardless of cause, a car accident on the weekend, a cancer diagnosis, a bad back that has nothing to do with work all qualify. Many business owners assume workers' comp has them covered and are surprised to learn it does nothing for an off-the-job injury that keeps an owner or key employee out of work for months.

Short-Term vs. Long-Term Disability

• Short-term disability: Typically pays 50-70% of income for a few weeks up to about six months, often with a short elimination (waiting) period of 0-14 days.
• Long-term disability: Kicks in after short-term ends or after a longer elimination period (often 90 days), and can pay for years or until a specified age, usually replacing 50-60% of income.

Why This Matters for a Small Business

For a sole proprietor or a business with a small number of owner-operators, the owner's own ability to work is often the single biggest unprotected risk on the balance sheet: there's no salary continuation policy, no large HR department absorbing the gap, and revenue can stop the day the owner can't perform the work. Offering group disability coverage to employees is also an inexpensive way to compete for talent, since many larger employers include it as a standard benefit.