Workers Compensation Insurance

• If you are injured on the job, your employer's workers' compensation insurance policy is designed to replace your wages while you are disabled. Unfortunately, there is often a significant delay between the time you are injured and the day you begin receiving benefits. Additionally, many states have restrictions on the amount of money you may receive from workers' compensation policies, which could still leave you with insufficient funds to handle normal monthly obligations.
  
  

Disability Insurance

• Disability insurance is designed to replace a portion of your wages if you are injured and unable to work. Because most disability insurance policies are issued by private carriers, the benefits are income-tax-free and will be paid if your injuries prevent you from functioning in your normal occupational position. Most states limit how much a disability insurance policy can pay you to a maximum of two thirds of your gross monthly wages. Once you are deemed eligible for benefits, you will continue receiving regular checks based on the provisions of your coverage until you are healed or your benefits have been exhausted.
  
  

Accident Insurance

• Accident insurance policies pay small one-time benefits for any injuries you sustain, regardless of whether those injuries occurred while on or off the job. More severe injuries result in larger benefit checks. Unlike disability insurance, however, the benefit consists of a one-time payment, as opposed to regularly recurring monthly checks. Accident insurance may help reduce medical costs, but it is essentially ineffective for replacing lost wages.
  
  

Personal Savings

• Withdrawing money set aside in a savings account is one of the most common methods of replacing lost wages for disabled employees. Unfortunately, too few people have savings large enough to pay their ordinary monthly bills for any sustained period. Ideally, deposits into a separate savings account designated as an emergency reserve fund should be made regularly to create a financial cushion that can be used for such purposes.
  
  

Borrowed Funds

• Borrowing money is another common method used to replace lost wages when employees are disabled. This comes in many forms such as cash advances on credit cards, 401(k) loans, selling stock shares or hard cash from friends and family. Of all the ways to cover lost wages, borrowing money is probably the least favorable and most likely to create further financial hardship in the future.