Disability Insurance Articles

Workers Compensation And Its Impact On Disability Insurance Rates

2011-09-08

There are several things that determine disability insurance rates, one of which is workers compensation. In many cases, workers compensation can have a favorable impact on the cost of disability insurance; but, in some instances, it does the opposite by driving the price up.

Many people confuse disability insurance with workers compensation as they both have similar functions. However, the big difference is that workers compensation only covers injuries faced on the job, while disability insurance includes injuries outside of the workplace and generally covers a longer time period.

Statistics prove that more injuries happen while not working; therefore, disability insurance is of great importance. For single income families and small business owners, an off-work injury can spell out considerable financial loss. While most people are covered with employer protection by way of workers compensation, many leave themselves vulnerable to bear the consequences of an injury that didn't happen at work, yet prevents them from working.

As similar as the two protections are, it is not so surprising that they would, in fact, impact each other. The ways in which workers compensation can negatively affect disability insurance rates include a recorded increase in liability. This means that workers compensation claims can increase your liability in the eyes of an insurer. Just like any type of insurance, accidents, injuries and claims all work to increase your risk factor.

It is unfair that a work-related accident that you had no control over will affect your liability and decrease your insurability. However, although it may be a tough pill to swallow, it is also important to understand that while it can work against you, in general it is meant to work for you.

You are actually being protected from ever-increasing insurance rates by the insurance provider upping liability on those who make multiple claims. There are people who work steadily on bilking the system and making fraudulent claims. Tying the two insurance protections together helps to catch and control this type of insurance abuse and fraud.

On the flip side, workers compensation can also work to benefit your disability insurance rates. This is because two forms of protection offer more options as far as what you need, how much coverage and when the benefits kick in.

Regardless of statistics, you know your lifestyle better than anyone and, if you feel your chance of injury is far more likely at work, then you can customize your disability insurance to work mostly as a last resort back-up plan. This can be done by extending the time period in which your disability benefits would begin paying. Additionally, shorter term policies can allow you to reevaluate the situation and adjust accordingly to meet your needs.