It is common for an employee to experience a disability leave at some point in their careers. Mental illness in particular is growing in prominence as a cause for a short-term or long-term disability leave. According to Manulife Financial Group, disability claims based on psychiatric injury, primarily depression, are growing at the fastest rate. Among youth in particular (15 to 24 years old), mental illness related disability is the most common type of disability.
Given the prevalence of disability leaves, many employers will offer policies of Short-Term and Long-Term Disability. Short-Term and Long-Term Disability Benefits will protect a person’s monthly earnings in the event of disability. Disability benefits are simply income replacement insurance in the event of injury or illness.
In the context of a workplace injury, an injured person can receive income replacement from the Workplace Safety & Insurance Board (WSIB). For other injuries and illnesses, one should look to their Long-Term Disability policy (LTD). A typical Long-Term Disability policy will pay 70% of employment income up to $3,000 per month.
The definition of disability under a policy will vary. Unlike legislative schemes like the Statutory Accident Benefits Schedule (SABS) or Canadian Pension Plan (CPP) Disability Benefits, disability insurers use their own definition of disability. In any long-term disability case, it is crucial to review the actual wording of the insurance policy. It will be the policy that will determine entitlement and quantum of benefits. There are a variety of different criteria and wording in policies that could have a dramatic effect on entitlement.
Typically, disability insurers look to illness or injury that prevents someone from performing the substantial duties of their “own occupation.” After two years, the test for disability becomes more stringent and looks at ability of a person to perform duties of “any occupation.” Long-term benefits will continue as long as the disabled person is deemed unable to perform any occupation until age 65.
It is important that any psychological, physical, or neurological complaint is well-documented and reported to a treating physician. Applications for Short-Term or Long-Term Disability often require a medical report to be completed by a family doctor. A family doctor who is fully informed of the illness or injury will be better suited to complete this medical report. If there is an extended disability leave, particularly any leaves that are longer than 2 years, medical evidence of the disability will be critical to having the application for disability benefits approved.
There are normally provisions in a disability policy that allows for deductions for Canadian Pension Plan Disability Benefits. CPP doesn’t simply fund retirement – there are disability benefits for injured or ill Canadians. CPP Disability Benefits are considered a “first payor” and therefore any benefits payable under CPP can be deducted when determining entitlement to Long-Term Disability. The maximum benefit for CPP Disability Benefits is currently $1,335.83 per month.
To qualify for CPP Disability Benefits, disability must be both “severe” and “prolonged,” and it must prevent you from being able to work at any job on a regular basis. The Government of Canada defines these terms as follows:
Those that are risk averse may also have Critical Illness Insurance. These policies are not common among employers and are often purchased by individuals. Unlike Long-Term Disability, critical illness does not provide monthly income. Policies of critical illness will enumerate different illnesses and an insured who meets the criteria for a critical illness will receive a lump sum payment. The policy will cease after this payment is made.
