Average Weekly Wage

What Does Average Weekly Wage Mean?

An average weekly wage is a figure used to calculate disability insurance benefits when a person becomes disabled due to an injury or illness covered by their policy. This calculation is especially relevant for workers’ compensation and disability insurance.

The figure usually comes from a worker’s earnings over the 52 weeks before the injury, though some states use a shorter look-back period or include overtime, bonuses, and the value of housing or meals provided by the employer. For employers, this is one reason payroll records have to be accurate when buying workers compensation insurance.

Insuranceopedia Explains Average Weekly Wage

If individuals become disabled but don’t have disability insurance or aren’t eligible for workers’ compensation benefits, they can quickly deplete their savings and face financial hardship. To determine how much disability insurance or workers’ compensation coverage a person is entitled to, their average weekly income must first be calculated. Since these benefits are designed to compensate for lost wages, the amount of benefits issued will be based on this figure. Workers who are self-employed or work for an employer that doesn’t carry coverage often turn to private disability insurance to replace income if they can’t work, since the benefit amount on those policies is also tied to pre-disability earnings.