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Disability insurance is a type of life insurance that pays benefits when a person becomes disabled as defined by the policy. A company licensed to sell life insurance for disability benefits is considered a disability insurance company. Disability insurance companies play a central role in the administration and payment of disability insurance benefits in Canada. These insurers provide disability benefits directly through both group and individual insurance policies. The insurers also act as agents or as a third-party administrator for disability benefits plans set up by governments, large employers or non-profit organizations.
In Canada, insurance falls under the authority of the Provinces. Therefore, insurance companies are regulated at the provincial level even though they are national, and in many cases, international corporations. Each province has an Insurance Act and associated regulations that dictate the rules an insurance company must follow to offer insurance policies in the Province. While the rules from province to province are very similar, there can be important differences.
When considering the rights and obligations of your insurance company, you must consider them in the context of your province. You can't always rely on court cases from other provinces or the experiences of others who live in other provinces because the rules in that province may be different.
It is important to appreciate that there is no "standard" disability insurance policy or plan. Each insurance company issues thousands of variations of its base policy. It is rare for two disability insurance policies to be the same, even if they are issued by the same insurance company.
Buying an insurance policy is very much like buying a car. You get to choose various models of the car. You can then pay more to get upgrades and bells and whistles. Therefore, the disability policy you end up with depends on the choices made when buying it. If you are covered under a group insurance policy, then your employer would have made these choices when buying the plan. If you bought an individual policy, then your insurance broker would have presented the various options to you, or recommend a pre-built policy that was suited to your needs. This is important to understand because it means you can’t easily compare your situation to others, even if you both have an insurance policy issued by the same insurance company.
The following are companies in Canada involved in the administration and payment of short- and long-term disability benefits:
Self-funded plans are administered by disability insurance companies or claim management companies, so they have the look and feel of a group disability insurance policy. However, these plans are not group insurance policies. The insurance company or claim management company is acting as a third-party administrator of benefits, but the employer or non-profit organization maintains liability for funding and authorizing payments under the plan. Self-funded and non-profit disability plans differ from group insurance policies in that they often have greater restrictions and limitations on the rights of members to appeal a denial of disability benefits. If you discover you are part of this type of disability plan, it is important to educate yourself on your rights and obligations. Below, we review some of the most common disability benefits plans that are administered by insurance companies and claims management companies.
Hybrid disability insurance plans are somewhat of a cross between a basic group insurance policy and a self-funded disability insurance plan. These are situations where the disability plan is technically a group insurance policy, but the policyholder (government or large corporation) retains significant power and authority over the policy. We think of these plans in a separate category because they are more complex.
Resolute Legal is a national disability claim law firm focused exclusively on helping Canadians win disability payments from insurance companies and the CPP Disability Program.
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