Income Protection vs. Workers Compensation: Do you know the difference?

Income Protection vs. Workers Compensation

Employees are covered under their employer’s worker’s compensation policy. Federal law requires all employers to purchase the policies if they hire more than one worker. The policies provide assistance when the worker is injured on the job. However, consumers have the option to purchase their own policies to prevent financial losses and find a way to pay their own expenses. Those who aren’t sure if they need their own policies review and compare income protection and worker’s compensation insurance and the benefits of the policies.

What is Income Protection?

Income protection insurance provides a specific amount of money whenever the policyholder cannot work and generate any income. Policyholders who cannot work due to a sudden injury or accident file a claim through their insurance carrier and acquire a portion of their earnings until they recover. The replacement wages are tax-free and help consumers pay their mortgage and living expenses until they can return to work. However, policyholders can receive wage replacement until they retire or until their death if they are never able to go back to work.

Unlike worker’s compensation coverage, the policyholder doesn’t have to go through their employer to get wage replacement. They just file a claim through their own insurer and receive the funds according to the schedule defined in their policy. Also, worker’s compensation doesn’t offer permanent wage replacement and imposes certain restrictions for the injured worker. Consumers can get help at if they have any questions about income protection insurance.

What is Worker’s Compensation?

When a worker is injured on the job, their employer sends the worker to human resources to start a worker’s compensation insurance claim. Next, the worker goes to the emergency room or an urgent care facility for a medical assessment. Forms are filed through the insurer by the employer and the doctor that performed the medical assessment and any treatment needed for the worker’s injuries. All injured workers must file an insurance claim within 30 days following their accident and injuries.

After the claim is submitted, a claims adjuster investigates the accident that caused the worker’s injuries. If the worker’s injuries qualify according to the terms of the policy, the worker receives full medical coverage for their injuries and wage replacement through the policy. The wage replacement is about 80% of the worker’s regular pay. If the claim is denied, the worker will need to contact an attorney and file a legal claim to recover any benefits or get payments for their medical expenses.

The insurer requires the worker to submit to drug and alcohol testing during their treatment. Any worker that fails to alcohol or drug screening is not eligible for worker’s compensation. Once they are disqualified, the worker cannot get insurance coverage through their employers. If the worker was approved and sustained more profound damage, the insurance provider might offer a larger settlement to cover all the worker’s financial losses including an inability to return to work and support themselves.

What are the Major Differences?

Income protection is a policy that the individual or worker pays for themselves, and they are guaranteed the funds whenever they need them. Worker’s compensation is paid for by the employer and requires the worker and their injuries to qualify according to the terms of the policy. Injured workers aren’t guaranteed worker’s compensation benefits.

Employees who are injured on the job could receive coverage under worker’s compensation insurance. However, employers cannot guarantee coverage, and some workers don’t receive wage replacement at all. Consumers review income protection insurance and determine if it is the right policy to protect them from financial losses.

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