Workers’ Comp vs. Disability Insurance: What’s the Difference?

What workers’ compensation covers

Workers’ compensation is designed for injuries and illnesses connected to work. In Washington, L&I describes workers’ compensation as no-fault insurance that provides medical benefits and partial wage replacement to workers injured on the job, including workers with occupational illnesses.

Workers’ compensation rules are set by state law, so benefits and procedures differ from state to state. The Washington details later in this article apply only to Washington.

What disability income insurance covers

The Washington Office of the Insurance Commissioner describes disability income insurance as insurance that provides periodic payments to replace income lost when the insured person cannot work due to sickness or injury. It is private coverage, and the policy controls eligibility, the definition of disability, waiting periods, benefit amounts, benefit duration, exclusions and how other income is treated.

Coverage can come from an employer, a union or trust, a voluntary workplace benefit the employee pays for, or an individual policy.

Read more: What is income protection? →

The main difference between workers’ comp and disability insurance

The biggest difference is what each one is built around. Workers’ compensation is built around covered work-related injuries and occupational diseases, under rules set by state law. Disability income insurance is built around being unable to work because of a covered illness or injury, under the terms of a private policy. Whether a particular condition is covered by a disability policy depends on that policy.

Workers’ comp vs. disability insurance at a glance

Applies to

Workers’ compensationCovered work-related injuries and occupational diseases

Disability income insuranceA covered illness or injury that keeps someone from working, as defined by the policy

What it may provide

Workers’ compensationMedical benefits and partial wage replacement, under state rules

Disability income insurancePartial income replacement, up to the percentage and limits in the policy

Who provides or administers it in Washington

Workers’ compensationThe State Fund administered by L&I, or a certified self-insured employer

Disability income insurancePrivate insurers, through an employer, union/trust, voluntary workplace benefit or individual policy

Coverage requirement / availability

Workers’ compensationGenerally required for Washington workers unless they meet specific exemption rules

Disability income insuranceAvailability depends on the employer, union/trust or individual coverage

Rules determined by

Workers’ compensationState law and the state workers’ compensation program

Disability income insuranceThe specific policy or plan

This table describes general differences only. For workers’ compensation, the state program’s current rules control. For disability income insurance, the specific policy or plan controls.

Workers’ comp vs. short-term disability

Workers’ compensation focuses on covered work-related injuries and occupational diseases. Short-term disability is private disability income coverage designed to replace part of income for a limited period when a covered condition prevents work, subject to the policy’s terms.

In other words, workers’ compensation is tied to how an injury or illness relates to work, while short-term disability is tied to the terms of a policy. A short-term disability policy sets its own waiting period, benefit amount, benefit period and exclusions.

Short-term vs. long-term disability insurance →

Does Washington State have short-term disability? →

Can workers’ comp and private disability insurance both apply?

Whether and how private disability insurance coordinates with workers’ compensation depends on the terms of the disability policy. Anyone in this situation should review the policy documents or ask the insurer or plan administrator how the policy treats workers’ compensation.

How workers’ compensation works in Washington

State Fund vs. certified self-insured employers

L&I states that Washington does not allow private workers’ compensation coverage. Employers must purchase coverage from L&I, through the State Fund, or be certified self-insured employers. A self-insured employer directly provides workers’ compensation benefits to its injured workers and manages their claims, with oversight from L&I’s Self-Insurance program. L&I notes that a worker’s rights and benefit entitlement do not change when the employer is self-insured, although who manages the claim and the process differ.

L&I also states that, unless the work meets strict exemption rules, employers are required to provide workers’ compensation coverage. This article does not summarize those exemptions; L&I’s coverage guidance, listed in the sources below, sets out the actual rules.

Time-loss compensation

If a doctor certifies that an injured worker cannot work, L&I or the self-insured employer may pay part of the lost wages, called time-loss compensation. L&I currently states the benefit is 60% to 75% of the wage the worker was earning, depending on how many dependents they have, with minimum and maximum amounts set by the Legislature.

This is Washington workers’ compensation information only. It is not a disability insurance percentage and should not be applied to other states. L&I’s current Wage Replacement page controls.

Current waiting-period rule

For injuries on or after June 6, 2024, the first three days are a waiting period. Those days are paid if the worker is still off work on the seventh day after the injury. L&I’s current Wage Replacement page, listed in the sources below, controls.

Washington Paid Leave and workers’ compensation

Washington Paid Family & Medical Leave is a separate state program run by the Employment Security Department. According to Washington Paid Leave, a worker cannot receive workers’ compensation time-loss or wage-replacement benefits for the same week they receive Paid Leave. Medical-only workers’ compensation payments from L&I are allowed while someone is on Paid Leave.

This rule is specific to Washington and should not be generalized to other states.

Washington Paid Leave and disability insurance →

What employers should understand

Workers’ compensation, Washington Paid Leave and private disability income insurance each have their own rules and purposes. Workers’ compensation addresses covered work-related injuries and occupational diseases. Disability income coverage, where offered, is governed by its policy. Employees often don’t know which applies to what, so it helps to understand what coverage employees actually have and to explain the differences clearly.

Disability / income protection for employers →

Common questions

Sources

1. Washington L&I — Do I need a workers’ comp account? (private coverage not allowed; State Fund or self-insured)
2. Washington L&I — Injured workers: what you need to know (exemption rules; self-insured employers)
3. Washington L&I — Wage Replacement (time-loss compensation and waiting period)
4. Washington L&I — About Self-Insurance
5. Washington Paid Leave — File your weekly claim (workers’ compensation and Paid Leave)
6. Washington Office of the Insurance Commissioner — Consumer insurance glossary ("Disability income insurance")

Educational information only, not legal or tax advice. Check official sources for current program rules.

Related resources

• Short-term vs. long-term disability insurance
• Does Washington State have short-term disability?
• What is income protection?
• Washington Paid Leave and disability insurance
• Disability / Income Protection for employers
• Income Protection Gap Calculator