Workers’ compensation vs. disability insurance

While both workers’ compensation and individual disability insurance cover a portion of your income when you can’t work, there are many important differences. Knowing what injuries and sicknesses they cover (and how) will help you provide the right benefits for yourself and/or your employees.

A woman in a wheelchair tends to her baby in a home nursery.

What is workers’ compensation?

When people are hurt or sick, it impacts their lives in many ways. One of the most important is their ability to continue working and earning a living. If they are forced to miss time from work, it can cause a cascading series of issues that can affect their livelihoods and even their ability to heal. Unfortunately, an injury or illness that forces someone to miss significant time from work is more common than most people realize.

1 in 4 workers will suffer a disability during their career¹

Workers’ compensation (often shortened to workers’ comp) is a government program that helps with compensation for disabilities in certain job-related situations. It’s a type of insurance that most states require employers to provide to their employees. Even if it isn’t required, it’s often a good idea for employers to provide it or to plan for contingencies in order to shield themselves from potential legal action.

Qualifying for workers’ compensation

Workers’ compensation only comes into play with work-related injuries or illnesses. If your disability did not happen on the job or because of the job, it will not cover you. Most issues that cause people to miss work, however, are not job-related.

What does workers’ compensation cover?

If you’re hurt on the job, workers’ comp generally covers:

  • A portion of your income or wages for the time you miss
  • Medical treatment expenses
  • Vocational rehabilitation
  • Permanent injury compensation

Workers’ compensation varies state by state

Each state has different laws governing workers’ comp, and the benefits vary greatly. To see the rules for your state, whether you qualify, and what compensation you might receive, visit the U.S. Department of Labor workers’ compensation website. You can select your state’s program from there.


How does disability insurance work?

Disability insurance replaces a portion of income when an employee is unable to work. Most unexpected medical issues are covered, even if they are unrelated to the job. Compensation during a disabling event can make the difference between a quick recovery and return to work and a life-changing negative event. Disability insurance typically provides 50% to 70% of an employee’s wages. Short-term disability usually begins immediately, and it can last up to two years. Long-term disability often has a waiting period (called an elimination period) before you can start collecting, but it can then last up to 10, 15, 20, or more years. New York Life offers both short-term and long-term group disability options with a variety of options to fit every benefits strategy and budget, from fully employer-paid to contributory plans. If you are self-employed or interested in a personal disability plan, we also offer individual disability insurance.

What does disability insurance cover?

Each disability insurance policy can be slightly different, but they usually cover almost any unexpected medical issue. There are very few exceptions. Here are some common issues that disability insurance typically covers:

Acute Injuries

Chronic pain



Broken bones

Back pain



Spinal injuries




Complications from pregnancy

Hip or knee issues

Heart disease

Sight or hearing loss

How can disability insurance money be used?

The short answer is that it’s your money, and you can use it for whatever you want. Disability insurance is designed to cover more than medical bills; it helps to replace a portion of your income, so your family can continue to lead the lifestyle they’re used to, even while you’re dealing with a disability.


Workers’ comp vs. disability insurance—what’s the difference?

The main difference between the two is that workers’ comp is specifically for injuries or illnesses that happen on the job. Disability insurance also coversmost common injuries and sicknesses that happen outside of the workplace. Workers’ comp is very important for people in dangerous professions, but for most people, disability insurance has a much higher chance of helping, since most issues don’t happen on the job. Here are a few other key comparisons:

Workers' compensation

Disability insurance

Types of injury and illness covered

Job-related only


Covers partial wages



Covers medical expenses



Length of short-term coverage

3-7 years (varies by state)

Options of up to 2 years

Length of permanent/long-term coverage

Often to age 65 (varies by state)

Options of up to Social Security retirement age

Why should I offer disability insurance to my employees?

More than two-thirds of U.S. workers would have trouble paying basic expenses, like a mortgage (or rent), utility bills, and groceries if their next paycheck were delayed by just one week.2

Disability insurance allows employees to continue supporting themselves while they get better. By providing it as an employer, you are providing an added employee benefit, which can help with satisfaction and retention. Our agents can help you find the right benefits package that offers protection for your employees and fits your budget.


Get help building a strong benefits strategy from our small-business financial professionals.

We can help you build and execute your employee benefits, offer realistic benefits packages, and plan for your retirement.

1Social Security Administration, 2021:

2“Getting Paid in America,” American Payroll Association, 2020

Neither New York Life Insurance Company, nor its agents, provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.