What is Long Term Disability Insurance in Canada?
Long-term disability (LTD insurance ) provides financial protection if you become disabled and unable to work for an extended period. It replaces a portion of your income, usually around 50-70%.
LTD insurance helps pay for living expenses if you can’t work due to illness, injury, or accident. It gives peace of mind knowing you’ll have replacement income if faced with an unexpected disability.
Who Needs Long Term Disability Insurance ?
LTD insurance is crucial if your ability to earn an income depends on your health. That includes most working Canadians. It’s especially important if:
– You are the primary income earner in your family
– You lack adequate savings to support yourself if unable to work
– Your employer doesn’t provide LTD coverage
– You work in a hazardous occupation with higher disability risk
Even if you have employer-provided LTD, consider getting additional coverage. Employer plans usually only replace 50-60% of income. You’ll likely need more to maintain your lifestyle.
What are the chances of needing Long Term Disability Insurance?
Your odds of needing LTD insurance depends on factors like:
Age – Cost rises with age due to higher claims likelihood. Disability coverage is most affordable in your 20s and 30s.
Gender – Women often pay 20-40% more as their claims payouts are longer duration than men on average.
Occupation – Jobs involving manual labor or risky working conditions have pricier premiums. Executive occupations also pay more due to higher income replacement needs.
Health status – Poor health leads to higher rates or outright coverage declines when first applying. Get LTD insurance while young and in good health.
Read More : Self Employment Insurance
Here are statistics on the chances of disability occurring before age 65:
– 1 in 4 workers will suffer disability lasting 90+ days during their career
– 30% chance of being disabled for at least 90 days prior to age 65
– 50% chance you’ll miss 2+ weeks of work from illness/injury
Disabilities are quite common among the Canadian workforce. LTD insurance provides crucial income protection that workers desperately need.
What Does Long Term Disability Insurance Cover?
Long-term disability (LTD) insurance offers partial income replacement upon meeting the policy’s disability definition, which varies in criteria and definitions across policies.
Defining Disability
Insurance companies use varying definitions of “total disability” in their LTD policies. Most stipulate the inability to perform the key or essential duties of your regular occupation.
After the first 24 months of disability, policies typically switch to an “any occupation” definition. You must then demonstrate you are unable to work at any reasonable occupation based on training, education, experience and transferable skills. The alternate occupation must also meet the minimum income criteria outlined in your policy. This ensures you have the capacity to earn at least 60% or more of your pre-disability earnings.
Coverage Duration
Most LTD insurance plans continue paying benefits until the policyholder reaches age 65. This aligns with normal retirement age for Canadians. Some policies have shorter maximum benefit periods such as 2 or 5 years. Carefully review benefit duration as you want coverage lasting until typical retirement.
Monthly Benefit Amount
LTD insurance replaces between 50-70% of your gross monthly earnings immediately before disability began. Benefits max out at a defined amount per month, often around $10,000.
Ensure your monthly disability payment is sufficient to cover living expenses. You may need to supplement employer LTD coverage with an individual policy.
Notable LTD Insurance Policy Features
Higher-quality LTD policies offer advantageous provisions like:
– Partial disability clause – Provides reduced benefits if able to work part-time or earn limited income
– Cost of living adjustment (COLA) – Benefits increase annually to help offset inflation
– Future insurability option – Allows periodically increasing coverage amount without new underwriting as income grows
– Regular occupation rider – Extends ‘own occupation’ definition of disability and benefits beyond 24 months
– Survivor income benefit – Remaining LTD benefits get paid to your estate if you pass away while disabled
The Cost of Long Term Disability Insurance in Canada
Insurance rates can vary greatly depending on:
Age – Premium cost of long-term disability insurance rise significantly with age due to escalating claims likelihood. LTD coverage is most affordable in your 20s and 30s. Capture low rates early!
Gender – Women often pay 20-40% higher premiums as their average claim duration exceeds that of men.
Occupation – Jobs involving manual labor or higher risk factors have elevated rates. Executive roles also sustain higher premiums due to increased income replacement needs.
Health – Medical issues lead to higher rates or potential coverage declines when initially applying. Get coverage while young and in excellent health.
Benefit period – Policies paying lifelong benefits or until age 65 are costlier than limited 2 or 5 year benefit terms.
Monthly payout – Premiums incrementally rise alongside higher income replacement percentages.
Actual LTD premium ranges are broad, stretching from less than $20 monthly up to $500+ for high earners needing substantial coverage. Smart consumers utilize online calculators to estimate rates tailored to their unique situation.
Purchase Long Term Disability Insurance in Canada
Below are step-by-step instructions when purchasing individual or group LTD policies:
1. Verify details of any existing disability coverage through your employer, union, association etc. Clearly identify gaps needing supplemental coverage.
2. Thoroughly calculate required monthly income replacement percentage to sustain your lifestyle.
3. Get personalized quotes leveraging online comparison tools from leading disability insurers.
4. Closely evaluate all estimates including monthly premiums, exclusions, disability definitions and other fine print details that can make or break your protection. Don’t merely focus on quoted rates.
5. Select optimal LTD insurance provider and coverage type meeting your budget while delivering sufficient protection.
6. Complete detailed application paperwork. Be prepared to answer extensive questions concerning medical history, lifestyle factors and family risk elements that influence underwriting decisions. You may need to take special medical exams or provide doctors’ records.
7. Get approval decision which generally requires 2 to 8 weeks from application submission. Insurers present full policy manuals with precise terms once approving applicants.
8. Pay ongoing LTD premiums monthly or annually to sustain active policy status. Lapses in payments can invalidate protections.
Securing disability coverage when young and healthy, before problems set in, avoids future obstacles qualifying for critical protection needed later in life. Don’t chance it!
Eligible Conditions for Long Term Disability Benefits in Canada
When submitting LTD claims, your disabling medical condition or injury must:
1. Satisfy the policy definition of disability as written in your benefits contract.
2. Manifest symptoms after the waiting period concludes. Pre-existing illnesses may have special considerations or exclusions.
3. Functionally impair you enough to prevent working at any reasonable occupation matching skills and experience after the first 24 months of disability.
4. Require active medical treatment. Symptoms and activity limitations must persist despite therapeutic interventions.
You’ll need to supply extensive objective medical evidence from licensed doctors to verify total disability status to case managers.
While all types of injuries, accidents and illnesses can potentially qualify someone for benefits, below are the most prevalent diagnostic categories triggering successful long-term Canadian disability claims according to insurance industry data:
– Musculoskeletal issues including back, neck and joint disorders (31%)
– Mental health conditions like clinical depression, anxiety, and addiction constitute 21% of eligible cases.
– Neurological diseases like multiple sclerosis (6%)
– Cardiovascular disease (6%)
– Accidents such as fractures and trauma from falls or collisions (9%)
– Cancers (13%)
– All additional health conditions (14%)
Don’t worry if your situation doesn’t neatly match these common diagnoses. They merely demonstrate the statistical breakdown of approved LTD claims by medical classification over recent history. Your personal diagnosis does NOT directly impact the probability of securing rightful benefits. Fulfilling the policy disability criteria is what truly matters.
Applying For Long Term Disability Benefits in Canada
Follow these crucial steps when submitting long-term disability insurance claims:
Report Incident
– Promptly notify your LTD insurer after becoming disabled.
– Supply key details like diagnosis, symptoms, functional limitations and expected work absence duration.
Track Impact
– Maintain thorough records clearly confirming how medical illness or injury impedes capacity to perform essential job duties and usual daily living activities.
Get Evaluated By Doctors
– Get examined by all relevant medical specialists able to verify disability including physicians, surgeons, psychiatrists etc.
– Have licensed doctors submit compelling disability documentation directly to your claims case manager.
Submit Paperwork
– Fully complete all sections of claim forms forwarded by your LTD provider.
– Return documents promptly with ample supplementary medical evidence.
Collaborate With Insurer
– Respond quickly to reasonable requests for added patient information.
– Willingly attend independent medical evaluations if mandated by contract terms.
Diligently cooperating makes attaining claim approval vastly easier. Consulting disability lawyers further smoothes application procedures. Don’t delay!
Lump Sum Buyouts For Long Term Disability
Some LTD insurers occasionally offer lump sum buyouts paying a one-time, upfront settlement in lieu of future monthly income benefits. This provides a portion of total disability coverage value immediately.
Lump sum payouts furnish financial flexibility to:
– Pay off debts
– Fund healthcare/living expenses
– Invest the money as desired
Settlements transfer ongoing claim management from the insurance provider onto recipients.
Carefully weigh all variables when considering settlement deals. Compare long-range disability costs against immediate lump sum amounts. Buyouts typically deliver 30-60% of total achievable disability benefits.
Thoroughly discuss options with financial advisors and disability lawyers beforehand determining optimal moves. Don’t decide lightly.
What Happens After Approval of Long Term Disability Benefits?
Once your claim gets approved, you’ll begin receiving regular monthly LTD payments replacing lost income. The initial payment often covers retroactive time dating to the conclusion of your waiting period when short-term coverage ceased.
Below are common ongoing requirements post-approval:
Annual Financial Review
– Furnish annual proof of total household earnings and living expenses allowing insurers to validate appropriate monthly benefit amounts.
Medical Updates
– Periodically provide fresh documentation that your underlying disability persists and still prevents working. Some policies require updates monthly while others just once or twice per year.
Payment Schedules
– Insurers forward benefits monthly until eventually concluding at the maximum coverage time limit, typically age 65 retirement.
Occasional Check-Ins
– Anticipate possible requests to complete online status updates or conversations with assigned case managers.
You must promptly apprise your LTD insurance provider if health circumstances sufficiently improve enabling return to work. Carefully comprehend all policy terms dictating when benefits terminate.
Employment Termination While On Disability
Canadian employment laws don’t confer absolute rights to job protection for disabled workers absent for prolonged times. Regulations establishing maximum medical leaves before enabling termination vary by province and individual work situations.
For federally regulated workplaces, employers must provide equivalent position reinstatement after disability-related absences reaching up to 2 years if sufficiently recovered to return afterward.
Several provinces mandate employers hold jobs up to 1 year or longer for disabled personnel depending on circumstances. Other jurisdictions have zero statutes forcing companies to maintain positions. Closely review employment standards in your geographic area.
Some compassionate employers voluntarily choose to accommodate extended disability leaves by not permanently filling roles. Maintain positive communications about your evolving medical limitations and expected recovery timeline if possible.
If termination arises while collecting disability benefits, immediately consult an employment law attorney to request an assessment regarding potential wrongful dismissal or discrimination violations. Compensation through litigation may be feasible depending on specifics. Don’t delay exploring options!
Frequently Asked Questions About Long Term Disability Insurance In Canada
Are my LTD insurance benefits considered taxable income?
If you fully paid disability insurance premiums independently, the resultant benefits received later on will be completely tax-free. However, if your employer funded all or a portion of premium payments on your behalf over the years, disability payouts get counted and taxed as ordinary income.
Can someone collect Canada Pension Plan (CPP) disability benefits while simultaneously receiving long-term disability insurance payments?
Yes, concurrently collecting both CPP disability benefits and tax-free LTD insurance payouts is certainly possible. However, your actual LTD amounts will be reduced using a dollar-for-dollar calculation based on the amount of CPP disability payments entering your bank account each month. This integration prevents overlapping double-dips from both programs.
What should I do if my LTD claim gets denied?
Immediately consult an experienced disability insurance lawyer. Specialized attorneys will formally request your entire claim file and help assemble additional objective evidence substantiating your legitimate disability to submit compelling denial appeals. Nearly 60% of initially rejected LTD claims achieve eventual approval through savvy legal interventions. Don’t delay!
What medical conditions have the highest statistical rates of successful long-term disability insurance claims according to the insurance industry’s data?
Musculoskeletal disorders including back pain, joint/neck issues account for around 30% of LTD claim payouts industry-wide. Cases involving mental illness such as major depression, anxiety and other disorders represent the second leading category approaching roughly 20% of total cases.
Can pre-existing medical conditions from before acquiring long-term disability coverage later impact ability to file successful claims after becoming disabled?
The outcome varies case-by-case. Minor conditions openly documented while initially applying rarely affect eligibility if symptoms subsequently flare-up later causing disability. However, failing to disclose exceptionally serious pre-existing illnesses when asked during underwriting can certainly prompt claim denials down the road per standard policy exclusions. Tread carefully!