What is long-term disability (LTD) coverage?
Long-term disability coverage provides a person with a portion of their income when they are unable to return to work due to an illness or injury, for example, resulting from injuries caused by a motor vehicle accident. Someone who is disabled can use their LTD ‘income replacement’ coverage to pay for medical/rehabilitation expenses and the requirements of daily living.
Individual vs group LTD plans
Many employees receive short-term and long-term disability benefits under their employer’s group insurance plan. Individuals may also independently purchase disability benefit coverage from an insurance company, either because they are not covered through an employer group plan or because they wish to purchase additional benefits over and above what is available through their work.
All employer-provided LTD plans are not the same and the percentage of income replacement can vary. If your work plan provides 60 percent income replacement coverage in the event of long-term disability, you may decide that this would be sufficient to pay normal living expenses. However, if your plan pays 40 to 50 percent, particularly if you have dependants and/or are the sole provider, you may find that this would not be enough to cover expenses.
Typically, individual LTD plans provide a greater variety of choice in terms of benefits and features, than do group plans. For example, under an individual LTD policy, you may choose the amount of income replacement you want to receive (should you become disabled) and the waiting time until you receive payments. You may also opt for ‘partial benefits’ coverage which pays a reduced amount when someone is only able to work on a limited basis. However, whether you are covered under an individual or group plan, the idea behind this LTD coverage is that it provides a safety net in the event that a partial or total disability precludes you from being able to work.
If your place of work has a group disability insurance plan, your employer may pay all or some of the cost of this insurance, or employees may have the premiums deducted from their pay, depending on the nature of the group LTD plan offered by the employer. If your employer provides disability benefits, under the Employment Standards Act, everyone must have access to this coverage, which means that employees and their dependants cannot be discriminated against on the basis of age, marital status or gender.
Short-term and long-term disability
The purpose of short-term disability benefits is to provide a temporary income if a person cannot work due to injury or illness. Short-term disability coverage is usually purchased by employers for their employees and generally only replaces a person’s income, often for the first 120 days after they become disabled.
Long-term disability coverage offers income replacement when a person is injured or ill for a prolonged period and completely unable to return to work. For the first two years after becoming disabled, a person is eligible for LTD benefits if they are unable to fulfil the requirements or duties of their job. After two years, a person is only eligible to receive LTD benefits if they cannot perform the requirements or tasks for any occupation for which they are reasonably qualified, or could be qualified for, based on their education, training or experience.
How long must I wait before receiving LTD payments?
If you are covered under an employer disability benefits plan, your LTD benefits will typically kick in after your short-term disability benefits have expired (commonly, after 120 days), if your injury or illness continues to meet eligibility requirements. If you purchased an individual LTD policy, can choose the amount of time you would be willing to wait before receiving benefits, which would typically be 60 days, 90 days or 180 days, after you have become disabled. The shorter the waiting period until you receive LTD payments, the higher the premiums.
When do I apply for long-term disability coverage?
If your injury or illness is expected to prevent you from resuming your work beyond the LTD waiting period (also referred to as a ‘qualifying’ or ‘limitation’ period) that is specified in your LTD plan, you may be required to submit an application for LTD payments/benefits within three months of the end of the qualifying period. However, the application deadline may vary with different LTD plans, and claimants should refer to their LTD insurance policy or employee benefits booklet to determine the required timelines.
How much will I receive in LTD payments?
Monthly or weekly LTD payments are generally based on a percentage of a claimant’s income at the time they were approved for long-term disability. For anyone covered for long-term disability under an employee plan who qualifies for LTD, you will be paid the percentage of your pre-accident/illness income that is defined in your employer’s benefits booklet or in your collective agreement. If you have independent or personal disability insurance, then you will receive the percentage that was agreed upon in your contract with your insurer. Some plans also place a cap or limit on LTD payments, up to a specified monthly amount, which means that higher income individuals could see a much greater decline in their income if they become disabled.
Can I also receive other forms of income replacement if I am eligible for LTD?
The short answer is ‘yes’. Someone who was injured in a car accident and is unable to work as a result of their injuries may, for example, be entitled to receive an income replacement benefit under the statutory accident benefits provided by their vehicle insurance policy as well as LTD payments if they are covered under an LTD plan. However, the LTD payments received for the same period are deducted from the amount paid in accident benefits for that period. Anyone who was injured due to another party’s negligence, is also entitled to file a civil action against the ‘at fault’ party and may seek damages for loss of past and future income.
Be aware that although a claimant may be eligible for income replacement payments from several sources, which can ensure they receive the optimal amount to which they are entitled, claimants are not permitted ‘double recovery’, which means they cannot receive payment for the exact same loss from multiple sources. Any insurer that is providing a form of income replacement benefit will require you to inform them of other sources from which you are receiving the same benefit.
At Kotak Personal Injury Law, our team of lawyers are highly experienced in representing clients in insurance disputes, including any circumstances where owed LTD or income replacement benefits are being denied or delayed for someone who is disabled due to illness or injury. We can also provide expert advice and representation if you were injured as a result of negligence and would like to know the types of claims and strategies that can provide optimal income replacement coverage for as long as it is needed. Call Kotak Personal Injury Law today to find out how we can help.