You need long-term disability insurance. Now what?

What benefits do you get from long-term disability?

When you qualify for LTD benefits, you’ll get a monthly payout for covering everyday expenses like your mortgage or rent, groceries, utilities, etc. (Find out the difference between life insurance and mortgage insurance.) Most LTD policies pay out benefits for up to two years if you can’t return to your job. If, after those two years, you’re still unable to work, the benefits may continue until you reach 65 years of age and can access the Canada Pension Plan. Alternatively, you may receive provincial disability support or Workplace Safety and Insurance benefits. Depending on your LTD policy, you could receive up to 85% of your salary. (Read this article to help determine your life insurance needs.)

Be warned, though: The paperwork for an LTD insurance claim is much more rigorous than for a short-term claim, says Brian Loewen, vice-president of Non-Par Insurance Solutions at Canada Life. “You have to show evidence of insurability to get that long-term disability claim.” That includes documentation like medical reports. Before we get into what’s needed to create and file a claim, let’s look at what’s covered.

Disabilities and illnesses covered by long-term disability insurance

Here are several illnesses and disabilities that may be covered by your LTD insurance, but do check your policy to confirm: 

• Cancers
• Cardiovascular disease and stroke
• Injuries affecting the body, such as the back and the brain. This can include fractures. 
• Post-traumatic stress disorder
• Mental health issues, such as anxiety, depression, bipolar disease and other mood disorders 
• Seizures
• Multiple sclerosis
• Gastrointestinal issues such as Crohn’s disease, irritable bowel syndrome and colitis
• Chronic fatigue syndrome
• An accident on the job

To truly know what’s not covered by LTD insurance, check your policy or consult your broker. There may be some situations where legal help can clarify whether your medical situation qualifies you for long-term benefits. We’ll get into legal issues shortly. (Do you need critical illness insurance?)

Are long-term disability benefits taxable?

If your employer pays part of the premium, then your benefits are taxable. If you pay the entire amount, then benefits are non-taxable, says Loewen. LTD insurance is usually purchased by the employer, but if your employer doesn’t offer it as a benefit or if you’re self-employed, you may want to consider buying it yourself. (When life insurance is taxable, and when it’s not.

What you need to know about long-term disability insurance and laws

If you’ve ever sat through the evening news, you’ve probably seen ads for lawyers focusing on long-term disability denials. Many of those ads are from the U.S., but filing for long-term disability benefits is a complex process no matter which side of the border you’re on. Let’s look at some questions that come up. 

Can you be fired or terminated while on long-term disability?

Yes, but it’s a much more complicated process than a simple firing. The guidelines vary based on province or territory. In Ontario, for example, an employer can terminate an employee on long-term leave if the employee is “unlikely” to return to work. The rationale is that there is an employment contract between the two parties, and it’s not being fulfilled because the employee can’t work. 

Now, here’s the complicated part. According to Diamond and Diamond Lawyers, before an employee can be terminated, an extensive, factual investigation and an expert medical opinion are needed. If the employer doesn’t get the evidence required, they may be obligated to continue paying benefits plus legal costs. (I reached out to several lawyers for this story. While none of them wanted to be on record, they all said it’s a good idea to have a lawyer if your claim is denied.)

Can my benefits be stopped without notice?

If you’re wondering if you could be forced to return to work while on long-term disability leave with benefits, it’s best to be prepared. It’s possible to be pressured to go back to work by the insurer, who may threaten to stop payments. But as long as you remain ill or disabled under the policy criteria, the insurer must continue paying the benefits. 

Can I be forced to retire while on long-term disability?

There have been instances where employees on disability have been forced into retirement, and many employers do have a policy of medical retirement after two years. It all comes down to your employer’s policy. If this happens to you, it’s best to consult a lawyer to ensure your rights are met.

If you’re receiving LTD insurance benefits, Preszler Injury Lawyers in British Columbia says your insurer can legally deduct CPP disability benefits from your payments. Review your policy to see if this is applicable to you. 

What happens to my disability payments if my employer goes bankrupt?

You should continue to receive the LTD insurance payments even if the company goes bust. That’s because when your claim is accepted, it’s the insurance company that’s covering the monthly payments, not your employer. In Canada, says Loewen, insurers have a regulatory regime that requires them to have monetary reserves for situations like LTD benefits. This reserve is supposed to be set apart from other funds. 

Can insurance companies follow and investigate me? 

Yes. It starts when the insurance company suspects fraud. And it is legal for them to survey from a public place. But that’s not to say you can’t do anything about it. If you think you’re being watched, request your file from your insurer, as any surveillance should be recorded there. If your claim is questioned, you might want to get legal advice. 

Claiming LTD insurance benefits can be a complicated process due to the length of time involved, the requirement of medical proof and the amount of money that’s paid out in benefits. If this is an option you’re considering, make sure you’re prepared with all the necessary paperwork.

Our guide to finding the best life insurance in Canada.

More about insurance:

• What you need to know about disability insurance
• 7 disability insurance myths to stop believing
• What to expect when illness or injury prevents you from going back to work
• Insurance you need and don’t need