How to Insure Your Income: Workers' Comp Disability

Under a workers' comp program, disability income benefits compensate the injured employee for lost or reduced earning capacity that results from a compensable injury or occupational disease. Such benefits are paid when the worker is unable to perform all or part of his or her regular duties.

Compensation is paid in four designated classes of disability, as follows:

• permanent total;
• temporary total;
• permanent partial; and
• temporary partial.

Under most workers' comp plans, income benefits are paid to employees who suffer work-related disabilities. A waiting period (usually three to seven days) applies before benefits for loss of wages begin. If the disability continues beyond a longer period (usually two to four weeks), retroactive benefits will be paid for the initial waiting period.

For permanent total disability or temporary total disability, the benefit is a percentage of the injured person's weekly wages before the injury. This figure is subject to stated minimum and maximum dollar amounts. Within each state, the percentage is the same for either type of total disability (66 2/3 percent is most common).

However, for permanent total disability, the dollar maximum and the benefit period are usually greater. Benefits for permanent total disability often continue to age 65, while benefits for a temporary total disability may be limited to a maximum number of weeks.

People with partial disabilities are able to perform some work, so the laws provide a benefit equal to a percentage of the wage loss (difference between earnings before and after the accident). In addition to benefits for lost wages, the state provides scheduled benefits for specific permanent partial disabilities, such as loss of limbs, sight or hearing. Usually, these benefits are paid in addition to any other income benefits.

Like Social Security and commercial disability income insurance, workers' comp plans include rehabilitation benefits designed to reduce costs by incentivizing disabled employees to return to work.

Rehabilitation benefits can consist of:

• physical or mental rehabilitation, intended to help the injured worker recover from the disability effects of the accident or disease;
• vocational rehabilitation, intended to give the worker new job skills, since the disability prevents the worker from pursuing the job he or she had before;
• maintenance allowance, which can include board, lodging and travel during rehabilitation; and
• rehabilitation devices, such as wheelchairs.

Rehabilitation also aids the insurance company. It helps to restore the injured worker to his former earning capacity. Today, insurance companies are among the leaders in providing rehabilitation for the industrially injured.

Rehabilitation benefits are provided by all states. Some states have set up a special fund to provide these benefits, while others have not. Various states impose weekly limits, maximum limits and special limits for specific types of rehabilitation.

An injured or diseased worker is entitled to receive all necessary medical and surgical treatment to cure or relieve a work-related condition. Certain maximums or limits may apply to a type of care or particular medical item, but overall benefits are unlimited.

Two types of payments are provided under a workers' comp plan's death benefits. A certain dollar amount is provided as a burial allowance, and income payments for a surviving spouse or children are provided.

Death benefits are usually a percentage of the deceased workers' wages, subject to stated minimum and maximum dollar amounts and a time limit. Some states have an aggregate payment limit. A surviving spouse may receive benefits for life, or until remarriage. Surviving children generally receive benefits until age 18 or 19 -- or age 22 or 23 if they are still in school.