What’s the Difference Between Disability Leave and Disability Insurance?

When it comes to disability leave and disability insurance, there’s a lot that employers need to know in order to best support their teams. Many people refer to disability benefits, insurance, and leave interchangeably, but the differences are significant when it comes to compliance and benefits administration.

What is the difference between disability leave and disability insurance, and what are employers’ responsibilities with each?

Reminder: What is Defined as a Disability?

The Americans with Disabilities Act (ADA) is a law that protects individuals with disabilities from discrimination in public places, transportation, jobs, schools, and businesses open to the public. The legislation became law in 1990 and is organized into five sections, called titles, as it relates to different areas:

  1. Title I: Employment

  2. Title II: State and Local Government

  3. Title III: Public Accommodations

  4. Title IV: Telecommunications

  5. Title V: Miscellaneous Provisions

The ADA defines a disability as “a physical or mental impairment that substantially limits one or more major life activities, a record of such an impairment, or being regarded as having such an impairment.”

What is Disability Leave?

Disability leave generally refers to a leave of absence or reasonable accommodation for employees who are substantially limited, physically or mentally, in one or more major life activities.

The term disability leave can sometimes refer loosely to sick leave or medical leave. This means time off from work for health reasons, whether paid or unpaid, not covered under an employer’s disability policy.

It’s also important to note that the Americans with Disabilities Act (ADA) requires reasonable accommodation—which includes a change in workplace policies, facilities, or how work is done—from employers with 15 or more employees.

An example of disability leave would be the federally-mandated Family and Medical Leave Act (FMLA), which provides qualifying employees with unpaid time off for multiple reasons, one of them being if an employee has a serious health condition and is unable to work.

A serious health condition under the FMLA includes an illness, injury, impairment, or physical or mental condition that involves incapacity or treatment. The incapacity or treatment must require the absence of more than three calendar days from work. Additionally, it must involve continuing treatment from a health care provider.

What is Disability Insurance?

On the other hand, disability insurance is typically a benefit that employers offer to their employees. Short-term and long-term disability insurance are meant to supplement an employee’s income should they experience a medical illness or injury that prevents them from being able to work.

For example, if someone cannot work due to a serious car crash and they have disability insurance, they receive direct payments based on their policy and level of coverage. Other situations include things like severe mental illnesses and cancer.

The main difference between short-term and long-term disability is the length of time that the disability insurance benefits last. The amount of time that disability insurance lasts depends on each policy, but short-term is usually 3-6 months. Depending on the plan, long-term disability can provide coverage anywhere from 5-20 years, or until retirement.

There’s also a waiting period—called the elimination period—before a covered employee will start receiving payments from their long-term disability plan. Depending on the policy, the amount of time is usually 90 days, whereas short term disability payments will kick in much sooner.

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