In Michigan, workers’ comp usually pays more than disability insurance if your injury or illness arose out of and in the course of your employment. Workers’ comp generally pays 80% of your after-tax average weekly wage, tax-free, and covers all reasonable and necessary medical treatment with no deductibles or copays. Disability insurance typically pays less — many long-term disability plans pay 50% to 70% of pre-disability earnings and generally don’t provide comprehensive medical coverage.
| Benefit | Typical Payment | Tax Treatment | Medical Coverage |
|---|---|---|---|
| Workers’ Compensation | 80% of after-tax average weekly wage | Tax-free | Full coverage, no deductibles or copays |
| Short-Term/Long-Term Disability | 50% to 70% of pre-disability earnings (LTD often ~60%) | Often taxable, depending on premium payment | Generally not included |
| Social Security Disability (SSDI) | Averages around $1,630/month nationally; subject to offset if combined with workers’ comp or LTD | Depends on total income | Not included (Medicare eligible after 2 years) |
In short:
- Hurt on the job? Workers’ compensation is usually the better option — it pays more (80% of your after-tax wage, tax-free) and covers all medical treatment.
- Injury or illness not work-related? Workers’ comp generally isn’t available, so you’d rely on what short-term disability, long-term disability, or SSDI pays if you qualify.
Michigan’s Workers’ Disability Compensation Act sets these benefits out in detail. An employee disabled from earning full wages because of a work-related injury generally receives weekly wage-loss benefits equal to 80% of his or her after-tax average weekly wage, subject to statutory maximums and reductions required by law. (MCL 418.301(7)) Employers must also furnish all reasonable medical, surgical, and hospital services and medicines needed because of a work-related injury. (MCL 418.315(1)) These wage-loss benefits are generally exempt from both Michigan state income tax and federal income tax. Benefits continue for the duration of the disability. (MCL 418.301(7) and (8))
Long-term disability insurance, by contrast, often pays about 60% of a person’s income, though the exact amount and tax treatment vary by policy — some LTD benefits are taxable and some are not, depending on who paid the premiums. Entitlement to LTD can also become harder to prove over time, since many policies shift the definition of disability from “unable to perform your own occupation” to “unable to perform any occupation” after roughly two years.
Individuals who become unable to work may also qualify for Social Security Disability Insurance (SSDI), which averages around $1,630 per month nationally. SSDI is frequently coordinated with both workers’ comp and long-term disability benefits, and federal offset rules can reduce SSDI payments when a person is also receiving workers’ comp or LTD.
What pays more in Michigan, workers’ comp or long-term disability?
Workers’ comp is usually going to pay a higher amount than long-term disability, but there are more obstacles a person must navigate to secure it. Michigan’s average weekly wage calculation includes overtime, discontinued fringe benefits, and even second jobs — all of which can increase your benefit amount. However, medical causation is a significant hurdle: a disabled employee needs a doctor to support the work-relationship of their condition to qualify.
What pays more in Michigan workers’ comp or Social Security Disability?
Some disabled employees also apply for Social Security disability benefits (SSDI). In Michigan, individuals can collect both workers’ comp and Social Security disability benefits at the same time, however, there is usually an offset that reduces what SSDI pays. There are also important tax considerations when a SSDI offset is applied. It is possible to minimize this offset if a person settles their workers’ comp claim for a lump sum payment.
We recommend speaking with an experienced workers’ comp lawyer whenever you have overlapping disability benefits to make sure you’re getting paid everything you’re owed. It is important to maximize what is paid and to avoid unnecessary tax consequences. It is also critical to protect future Medicare entitlement.
Injured while on-the-job in Michigan? Contact our lawyers now.
If you were injured while on the job in Michigan and are wondering what pays more workers’ comp or disability insurance, call now (855) 221-2667, or fill out our contact form for a free consultation. There is absolutely no cost or obligation. Our attorneys are here for you.
Our attorneys have been exclusively helping injured workers in Michigan for more than 40 years. Our attorneys can help you better understand Michigan workers’ comp law and what happens after someone has been hurt on-the-job.
To see what our own clients have to say about the caring, compassion, and communication they received from us, you can read in their own words about their experience here on our testimonials page from clients we have helped.
Michigan Workers Comp Lawyers never charges a fee to evaluate a potential case. Our law firm has represented injured and disabled workers exclusively for more than 40 years. Call (855) 221-2667 for a free consultation today.
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