Understanding the Long-Term Disability Process how does it work?

Most people who are receiving Long-Term Disability (LTD) benefits are receiving their benefits from their employment collateral insurance. Employers offer LTD as a way of engaging, retaining, and supporting employees. An LTD contract is something that is created between an insurance company and the employer. Every LTD policy is different, but there are several consistent elements of an LTD benefit. The following will review typical contract provisions.

Elimination Period

First, every LTD policy will state how many days an employee must be off work with an illness or injury before LTD benefits can start. This can be referred to as the “elimination period.” Some employees must exhaust their sick days, short-term disability benefits, employment insurance sick benefits, or possibly all of these. It is after the elimination period that LTD benefits could begin.

Previous Occupation Period

Next, an LTD policy will have what is called the “previous occupation” or “any occupation” period. What this means is, when a person starts LTD benefits, they are being assessed for their ability or inability to perform their previous occupation. Over time, usually around the two-year mark, the definition of disability changes and then the employees are evaluated for their ability to perform any occupation that they are reasonably qualified to perform. During this period, the employee’s medical health is often closely assessed.

Payment Amount

Next, is the payment amount or the amount your LTD will pay as a percentage of your pre-disability income. This amount is negotiated in the contract, but sometimes employees are offered the opportunity to pay a higher premium prior to their disability in order to get a higher payment. Some LTD policies pay as low as 30% of your previous income and as high as 70- 100%.

It is important to note that your LTD contract will have a provision that any money you receive from any other source, such as Workers’ Compensation benefits or Canada Pension Plan disability benefits will be deducted dollar-for-dollar from your LTD benefits. In this situation, you will get the same total amount, just from two sources. The policy may often also require that you apply for CPP Disability.

Your LTD payment could be taxable income or could be tax-free. Your benefits information should state this, but the way it is determined is that if an employee pays either a tax or the full premium amount for the benefits, then the income will be tax-free, otherwise it is taxable.

Recurrence Clause

Another element of LTD contracts is the Recurrence Clause. This clause applies to employees that return to work after being on LTD benefits, but become ill or injured again. Typically, a Recurrence Clause states that if the employee becomes sick within six months from returning to work from LTD, they will go back directly onto LTD benefits. If the employee returns to work beyond the six month mark or whatever timeframe is stated in the contract, then the employee would need to start back at the beginning and access short-term disability benefits or employment insurance sick benefits.

End Date

There are typically four reasons why a LTD benefit stops: an employee turns 65 years-old, they pass away, they return to work, or the insurance company suspends their payment.

If you are located in the Toronto area and your LTD claim has been suspended or denied, you should immediately contact an injury lawyer at Grillo Law P.C. to assess your application and advise you on the best way for you to move forward with your claim.