Joshua Goldberg

Long term disability (LTD) is something that anyone, at any age or in any career, can face.

Understanding the facts regarding how disability insurance and claims work is important for everyone in the workforce today. It’s especially important for the aging population as this group is more likely to find that they are unable to work.

Let’s explore how long-term disability works and when these policies can be useful.

Defining Long Term Disability

As the name implies, long-term disability relates to a condition, likely brought on by an illness or accident, that leaves a person unable to perform at their job for some extended time. This often affects many aspects of that person’s life such as income, family, and important payments. It is in these situations that a long-term disability claim can be an immense help. LTD exists to provide financial aid by paying out a percentage of your income while you recover from your illness or injury. Disability insurance lessens the burden on families and the individuals that are suffering an illness or recuperating from an accident.

When Does Disability Insurance Come into Play?

Disability insurance in Canada is available to you if you are temporarily out of work due to an accident or medical condition, or if you are permanently disabled. It is normal for people to experience illness and injury at some point in their lives that can negatively affect work performance or even render them completely unable to perform.

As with any situation, each disability claim will be unique and may have a different outcome. Sometimes individuals are unable to return to any form of work, and sometimes the disability is short lived and return to the workforce is possible. This totally depends on the type of illness, injury, as well as the age of the person and their profession. It’s particularly important for the aging population to be aware of disability insurance and how to go about activating it when needed.

If you’ve suffered a disability while insured under your employer’s benefit plan or a third-party plan, make sure to check the disability policies under your workplace insurance. Often, these will pay out a portion of your salary while you’re on leave. As mentioned earlier, each situation is unique and will depend on many circumstances. There are two types of policies you should be aware of: short-term disability (STD) and long-term disability (LTD).

A Snapshot of Short-Term Disability

Short-term disability pays a higher percentage of your salary during the time you are disabled. However, it usually covers only the first initial months. Short-term disability is typically not available through most workplace group insurance policies. As such, it’s worthwhile to check with your HR what coverages your specific plan includes. Short-term disability coverage varies by insurance provider as some may cover you for up to 6 months. After the allotted time frame, the policy is exhausted. Depending on the person’s condition, they can pursue an application for long-term disability if it is available.

My Employer Does Not Offer Disability Insurance – Now What?

If your employer does not offer disability insurance or you are self-employed, you can buy coverage through a third-party health insurance agent. The packages offered should cover expenses your business may incur if for whatever reason you are unable to work due to a disability.

If you are not interested in purchasing such health insurance, you may be eligible for government insurance. In Canada, you could apply for Employment Insurance (EI) sickness benefits through the Federal Government.

The Facts on Long Term Disability

Long-term disability may become available to people who have exhausted either or all the following: short-term disability insurance, sick leave benefits from your employer, or EI sickness benefits. If you qualify for long term disability, the insurance provider will pay a lower percentage of your salary, which can range anywhere from 60 to 80% of gross earnings before the onset of the disability. These policies usually last until age 65, the standard retirement age.

Note that being permanently disabled does not mean you will receive benefits forever. The term ‘permanent’ refers to the nature of the disability. Insurance companies vary on the definition of what ‘disabled’ means, so it’s always worthwhile to ask your HR or plan administrator to investigate the exact terms and what they cover.

Eligibility Requirements Disability Insurance – Before Two Years

Eligibility will depend on certain parameters being met at different various stages. Many aspects, including your profession and schooling, as well as ability to physically and/or mentally perform – will be a part of this investigation. To be eligible for short-term disability insurance in the first two years after becoming disabled, one will need to prove that they are unable to perform their occupation. The focus here is solely on whether a person can do their job or not. As mentioned earlier, typically the first type of benefit you receive is short term. What happens after if your condition still persists?

Eligibility Requirements for Long Term Disability – After Two Years

After 2 years, the terms for long term disability eligibility change. The disability can either improve, stay the same, or worsen with time. Whatever the situation, your provider needs this information to decide whether you are to be granted more coverage. After 2 years, the individual must not only prove that they are unable to perform their occupation, but also prove that they are completely unable to return to any occupation for which they are reasonably suited by reason of education, training, and experience.</p

As you can see, the ‘any occupation’ test is more detailed than the test for short term benefits. Many people who suffer from injuries like chronic pain and psychological impairments, are often cut off at or before they reach the change in sedition.

The ‘any occupation’ test is harder to meet, but it doesn’t mean that the person must prove to be unable to perform any job. The test looks at the context of the persons education, experience, and training and not just any type of jobs that the person may still be able to conduct.

Some examples can help illustrate this more clearly:

  • An executive making a 6-figure salary for a business company. Even if the only job they can do with a disability is working the cash register at a minimum wage salary, then they would likely still meet the ‘any occupation’ test.
  • A concert pianist who could no longer perform due to an accident. The insurer cannot deny the pianist compensation on the basis that they could perform a clerical job filing papers in an office. The test looks at the persons background and compares it to what they can do. If the salary or nature of the only job that they can return to is fundamentally different from their career work, then the person has a good chance of receiving benefit compensation.

It’s important to note that disability insurers still sometimes deny disability claims when the person has a strong case for being eligible for ongoing benefits.

The good news is that you do have options if you have a been denied or cut off from disability benefits before you’re able to return to work.