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Disability insurance plans are a type of insurance policy that makes disability income payments to eligible workers. Disability insurance plans include both group insurance policies and individual insurance policies. If you meet the criteria to be eligible for payments, the insurance company will pay a monthly disability benefit to you for a certain number of months or years. Short-term disability benefits typically last for a maximum of three to six months, but long-term disability benefits may be paid until you reach age 65. You may have short- and long-term disability income insurance through your employer’s group benefits plan, or you may have bought your own individual disability income policy.

Types of disability insurance benefits

It is important to understand that there are different types of disability insurance benefits. The type of disability plan or policy you have will dictate the rules that apply to you. Generally speaking, there are two categories of disability insurance plans:

  1. Insurance-based disability plans
  2. Non-profit disability plans

Both types of plans are administered by insurance companies, so it is easy to be confused if you are dealing with an insurance-based plan, or a non-profit plan that is being administered by an insurance company.

Most disability benefit plans in Canada are insurance-based disability plans. These include group disability insurance policies offered as part of employee group benefits packages and individual insurance policies sold directly to professionals or self-employed business people. Both individual and group insurance policies are regulated by provincial Insurance Acts and regulations.

Non-profit disability plans are different in that they are not based on an insurance policy. Rather, they are set up by governments or large corporations to pay disability benefits from a pool of money that is funded by employer and employee contributions. While there is no insurance policy per se, these non-profit plans are based on a document called “the Plan Text” and it reads just like an insurance policy, often with the exact clauses, conditions and language.

From the outside looking in, non-profit disability plans look and feel like group disability insurance plans. This is because employers or boards of directors hire insurance companies or claims management companies to administer these plans. The application forms, correspondence, and the disability benefits cheques will all come from an insurance company. While it will appear to you that this is a disability insurance plan, the insurance company is just an agent. This becomes important if you need to appeal a denial of benefits. Your rights to appeal can vary greatly in non-profit disability plans as compared to typical group insurance policies. When doing an appeal, it is critical to understand if your disability plan is a true group insurance policy or a non-profit disability plan administered by an insurance company.

Keep in mind that disability insurance plans often overlap and interact with other disability benefits programs, including Workers' Compensation benefits, Employment Insurance (EI) sickness benefits, Veteran’s Affairs Canada disability benefits, and provincial income support payments.

Transitioning from work to sick leave and disability insurance benefits

The transition from employment to being on sick leave and disability insurance benefits is a minefield of potential problems. Fortunately, you can avoid these problems by carefully planning your transition from work to sick leave. Take stock of the disability income benefits for which you may be eligible and determine what income payments you can access the day after you stop working.

In the short term, you will normally be able to access some combination of sick pay, vacation pay, short-term disability benefits or Employment Insurance sickness benefits. You can’t receive both EI sickness payments and short-term disability payments at the same time. However, if your short-term disability benefits are denied, you should apply for EI sickness benefits immediately because the approval process is much easier.

Your short-term disability payments will end after four to six months. You need to verify if you have long-term disability benefits that will start once the short-term period has expired. All long-term disability plans have a waiting period, which means that you don’t qualify to apply for long-term disability benefits until you have been off work and continuously disabled for four to six months. You want to verify if you have long-term disability benefits, and when the waiting period will expire.

It is important that you put your employer on notice that you are suffering an illness, and this is the reason for the drop in your productivity or work performance. Doing so will trigger your employer’s duty to accommodate your illness and disability. This duty to accommodate comes from provincial and federal human rights legislations, which are administered by human rights commissions. The accommodations come in many forms, but include modifying your work station, changing your work schedule, reducing your work hours, changing your work duties and allowing you to take a sick leave without fear of losing your job. That last bit is the important part, your employer won’t have an obligation to protect your job if you haven’t put them on notice that you are struggling with an illness or disability.

If you don’t notify your employer of your illness, then they can fire you for poor work performance. Once you are fired, you will lose your right to apply for short- and long-term disability benefits because you are no longer employed with the company at the time you took a sick leave. You can try to have your doctor confirm that your illness started while you were at work, but the reality is that you were still working so it is hard to prove that you were totally disabled from work at the time you were fired. You want to avoid this mess at all cost and can do so by putting your employer on notice of your illness as soon as possible and before you notify them of your need to take a sick leave.

Applying for disability insurance benefits

The procedure to apply for disability insurance benefits is essentially the same no matter what plan, policy or company you are dealing with. When applying for disability benefits it is important to understand whether you are eligible to apply, the process you must follow, and what you must “prove” to be successful. Applying for disability benefits is not the first step. We have discussed the things you should do before you apply.

Eligibility to apply for disability insurance benefits

The first thing to consider is whether you are eligible to apply. If your workplace offers a short-term disability insurance plan, then you almost always be eligible to apply for benefits. The same cannot be said for long-term disability benefits. You may not be eligible to apply for long-term disability benefits if you have been employed for less than a year and the illness or disability is something you've received treatment for in the months leading up to starting employment. This is called a pre-existing condition exclusion clause. If you are applying for disability benefits and have been employed for less than a year, you can be certain the insurance company will carefully examine whether you are caught by the pre-existing condition exclusion clause. Another reason you may not be eligible is if your illness is caused by something that is not insured under the policy or plan – or at least something the insurance company will claim is not covered under the policy or plan. The most common example is when a person is on stress leave due in part (or completely) because of a workplace bullying or harassment situation. Disability insurance companies will always claim that this is a workers’ compensation issue and not something that is covered by insurance.

How to apply for disability insurance benefits

The application process for disability benefits is the same no matter what disability insurance plan you are dealing with. You apply by filling out forms provided to you by the insurance company. Each insurance company has its own claim forms you must use, but they are basically the same and include:

  1. A Notice of Claim Form that you fill out;
  2. An Employer’s Statement Form that your employer fills out; and,
  3. An Attending Physician's Statement Form that your doctor fills out.

There may be slight differences in the how they are called or in the information they ask for, but these forms are essentially the same for all insurance companies. You need to fill out your form and then arrange for your employer and doctor to fill out the others. It is your responsibility to make sure that all three forms are submitted to your insurance company, along with any other documents they request.

Once the insurance company receives all the forms, it will consider your application “complete”. Most insurance companies will not consider your application to be complete until they receive all the forms back. Delays in your employer or doctor in filling out the forms will delay the entire application.

Proving disability when applying for disability insurance benefits

To be approved for disability benefits, the insurance company must accept that you suffer from a “total disability” as defined by the insurance plan or policy. There is no standard definition of “total disability” or “totally disabled”. Most policies will define it as “due to illness or injury the person is unable to perform the substantial duties of his or her own occupation”. It is common that after two years, this definition changes to “due to illness or injury the person is unable to perform the substantial duties of any occupation”. It is common for the definition of disability to change from own occupation to any occupation around two years after the benefits start date.

Medical evidence of disability is the only type of proof an insurance company will accept. This means that you doctor's support is important to your application; you have no chance of success without it. Insurance companies deny even doctor-supported claims. If your doctor is already on the fence, or worse, says that you are capable of working, then you have no chance of getting your claim approved.

Maintaining disability insurance benefits

It is always good news when the insurance company approves your application for short- or long-term disability benefits. You may think the worst is now behind you, but your dealings with the insurance company have just begun. Insurance companies never approve benefits and leave you alone. They will continue to contact you weekly or monthly asking for updates from you and your doctors. They will ask you to sign forms and to be examined by their doctors or attend rehabilitation programs they pay for. To successfully maintain payment of disability benefits, you will need to properly manage your relationship with the insurance company and comply with their requests.

Monthly Disability Payments

Once the insurance company approves your claim, they will start making a monthly payment to you by cheque or direct deposit to your bank account. The amount you receive depends on the formula set out in your disability insurance plan or policy. Normally, the insurance company will make the payment on the same day each month. It is important to know whether your disability benefits are taxable as income. Some disability benefits are non-taxable. 

The most common problem you will face is when the insurance company make irregular disability payments, either by granting conditional approval of your disability claim, suspending and restarting the payments for some reason, or by making the payments erratically, so you never know when to expect the money. Receiving irregular payments is the most stressful part of having an “approved claim”. Sometimes, these irregular payments happen because of poor operations by the insurance company, but usually it is because the insurance company has deemed you not to have done something they asked of you. The most common example is when they take the position that you or your treatment providers have not given the updated medical information they have requested. This puts you in a hard spot because often your treatment providers will say that they have already given all the information the insurance company is asking for. You get caught in the middle.

Finally, sometimes when you are receiving monthly payments the insurance company will offer to pay a lump-sum buy-out of your disability claim. This means that they offer make you a one-time lump-sum payment of future benefits, rather than continue to make monthly payments. You need to carefully consider the pros and cons of lump sum buy outs, before accepting a final settlement from the insurer.

Continuing Disability Review

Your disability benefits are subject to continuing disability review. Getting approved for disability benefits is not a one-time thing; you have an obligation under the policy to provide ongoing evidence of your disability. This ongoing disability review can be one of the more annoying and stressful aspects of dealing with the insurance company.

The continuing disability review includes things like giving verbal updates on your condition to your claims representative, having your doctor fill out forms certifying ongoing disability, and having you fill out forms detailing your activities.

It is now common for insurance companies to do covert review of your activities. They do this by monitoring your activity on social media, message boards and websites. They will also hire private investigators who will follow you around to video record your activities outside the home. Insurance companies then compare what they see from the videos and your online activities with what you are telling them. If they deem that there are “inconsistencies” between what they see and what you say, then they will suspend or terminate payment of benefits.

Rehabilitation & Treatment Programs

Most disability insurance plans require you to attend rehabilitation programs, if the insurance company deems it reasonable for you to do so. The insurance company can require you to attend a rehabilitation program and provider of their choosing. If you voice disagreement with the rehabilitation program or their choice of provider, you will experience tension with the insurance company. To varying degrees, insurance companies may take your objections and requests into account, and may modify the program or providers they have proposed. However, once they have made such accommodations, they will require you to attend the programs. If you refuse to attend the program, or attend but don’t give a full effort, the insurance company will deem you to be in violation of your obligations under the insurance plan, and will use that as a reason for denying your payments.

Appealing a denial of disability insurance benefits

If the insurance company denies your initial application or stops your disability payments for any reason, then you have the right to appeal the denial of disability insurance benefits.An appeal is a legal term that means you are asking “someone” to reconsider their decision. In this case, you are asking the insurance company to review whether their decision to deny payment was justified.

There are a few levels of appeal. If the first decision-maker agrees with the denial decision, then you appeal to the next level decision-maker. At each next level, the new decision-maker has the power to overrule all the lower decision-makers and can order a restarting of your payments. It is important to consider the context of your reconsideration appeal to determine if you have any realistic chance of success with our disability appeal. If you have no chance of success, you are better served to skip remaining internal appeals in favour of filing a lawsuit against your insurance company.

You will face different challenges depending on whether you are dealing with a short-term disability denial or a long-term disability denial. We have answered your top 7 questions about short-term disability denials.

While it is easy to go through the motions of appealing a disability claim, it is not easy to organize the appeal in a way that increases the likelihood of a favourable outcome. Most people, including many lawyers and doctors, do not appreciate what it takes to prepare an appeal that gives you the best chance of winning. If you plan to do your own appeal, then it is critical that you learn as much as possible about the process of appealing, the common mistakes to avoid, and what it takes to maximize your chances of success.

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