Disability Insurance and Paid Leave Aren't the Same - Council for Disability Awareness Blog

This article originally appeared on the American Fidelity blog

When you have to take time off from work, paid leave and disability insurance can help relieve some of the financial pressures of lost income. However, these two benefits are not the same.

Key Differences

Paid leave and disability insurance have different coverages but a common purpose. Employers may offer disability insurance as well as paid leave. Both may help cover lost wages when you have to take time off work.

Paid leave availability depends on the reasons covered by the paid leave program and covers any designated purpose. In contrast, disability insurance is specifically for a covered illness or injury to the policyholder.
In the event of your inability to work due to a covered disability, long-term disability coverage generally offers benefits until a specified retirement age, whereas paid leave typically provides payment for only 12 weeks each year.
Paid leave pays benefits if you miss work on a scheduled workday. If you work in the education industry, for example, you will be unable to claim paid leave benefits during the summer or holidays since you don’t typically work during those times. In contrast, disability insurance sometimes pays regardless of work schedule if you are unable to work due to covered disability caused by sickness or injury.

Paid Leave

Paid leave pays a portion of your salary if you can’t work for personal or family reasons covered by the paid leave program. Paid Family and Medical Leave (PFML) programs typically cover taking time off to go to the doctor or care for a sick family member. PFML benefit periods will vary by location and depend on various factors within each federal, state or local program.

Why paid leave is important:

Financial Security:Paid leave allows you to take time off for covered purposes while still receiving a paycheck. This provides financial security as you can continue to meet your financial obligations while taking time away from work.
Family Support: Depending on the program details, paid leave can provide much-needed support for you when a family member is ill or dealing with a death. This can be especially important for single-parent households or those with elderly or disabled family members.
Increased Productivity and Satisfaction: If you take time off, you may feel more productive when you return to work. This is likely because you can rest and recharge. In addition, paid leave may result in increased loyalty and feeling valued as an employee.

Disability Insurance

Disability Insurance helps replace a portion of your paycheck if you can’t work due to a covered injury or illness. The money may be deposited directly into your bank account or sent to you by check. This allows you to pay toward your living expenses and make other purchases as you see fit.

Why disability insurance is important:

Customization: You can customize your policy to fit your needs, such as when you’d like benefits to begin, the length of time for which you are covered and the amount of your monthly benefit.
Security: Disability insurance may help provide peace of mind that you will have a financial safety net in the event of a covered injury or illness.
Continuity: Disability insurance may help you maintain your lifestyle, even when you cannot continue working. This can provide a sense of stability and continuity during a difficult time.

Learn more about disability insurance

The importance of both

If you have disability insurance, paid leave may help cover your income during the elimination period. For those who have paid leave, it may help to keep disability coverage in place in case your leave runs out before you’re able to return to work. Disability insurance provides a type of income protection that can complement paid leave instead of being redundant.

Pairing disability insurance and paid leave may give you peace of mind while caring for yourself or others.

To learn more about income protection, visit RealityCheckup.info, which is part of a CDA consumer outreach program to help working adults understand the importance of having alternate sources of income for times when they cannot work due to illness, injury, or pregnancy.

This article is up to date as of October 2023 and has not been updated for changes in the law, administration or current events. This information is intended to be educational. It is general in nature and should not be considered financial, legal or tax advice. Consult an attorney or a tax professional regarding your specific situation.