1 in 3 Canadians Will Become Disabled Before the Age of 65

What You Need to Know About Your Group Long Term Disability

Having a source to replace your earned income in the event of an illness or accident is vital considering that on average 1 in 3 Canadians will become disabled for a period of more than 90 days at least once before the age of 65.  For those that are disabled for more than 90 days the average length of that disability is 2.9 years.

If you are one of the approximately 10 million Canadians covered under a group long term disability plan (LTD), it’s important to understand what your coverage provides. Don’t wait until after you’re disabled to read the employee handbook, because you could have a few surprises!

HOW MUCH COVERAGE DO I REALLY HAVE?

• Generally, employee benefit LTD plans are designed to replace up to 85% of your pre-disability after tax income.  Plans typically have a ceiling however, and high income earners are often disappointed (and sometimes shocked!) to learn that they are not covered for nearly as much as they need.
• The amount of your benefit is determined by formula. These formulas vary so you know what yours is.

WHEN DO I START GETTING BENEFITS?

• Usually, you are eligible for benefits to commence after being disabled for a period of 90 or 120 days.

IS THIS BENEFIT TAXABLE TO ME?

• If the LTD premium is paid by you personally, then the benefit will be received tax free.
• In groups where the employer pays the LTD premium, then the benefit when received will be taxable.  If this is the case, you can discuss with your employer or insurer what your options are for having tax withheld if disabled so there will be no nasty surprises come tax time.

WHAT ELSE DO I NEED TO KNOW WHEN I ENROLL IN AN LTD PLAN?

• Many group plans have a waiting period, usually three to six months, before a new employee is eligible to join the plan. If you were formerly a member of a plan at another employer, request that your new employer waive the waiting period.  This is something that a person being recruited to a new firm can try to negotiate.
• Pay attention to the Non-Evidence Maximum(NEM).  This is the maximum amount of disability benefit you would be entitled to without providing medical evidence.  You may be eligible to receive higher coverage if you take a medical examination.

ARE THERE OTHER OPTIONS?

If your current disability coverage is inadequate, you can consider purchasing an individual disability policy to “top up” your coverage.  I can help you to review your current coverage and, if necessary, co-ordinate it with personal disability benefits to ensure that you have the right amount of income when you need it most.