How to Insure Your Income: Workers' Comp as Income Insurance Introduction

Often, when people say someone is on disability, they mean the person is collecting permanent benefits from a workers' compensation program.

Like Social Security, workers' comp is a mandatory benefit. The main difference is that, while the federal government administers Social Security, employers have to administer workers' comp themselves -- or pay someone else (usually an insurance company) to do it.

Whatever the differences between the government and private-sector programs, one critical similarity remains: Neither plan will make a person rich.

Still, many people rely on workers' comp as a major income insurance device. In 1993, domestic workers' comp spending included $23.5 billion for disability benefits, $2 billion for survivor benefits and $17.4 billion for medical care. In contrast, private long-term disability insurance benefits were $3.1 billion in 1992.

In this chapter, we'll consider workers' comp as income insurance.