The perfect resource for people looking to learn more about long-term disability benefits.
The Ultimate Guide to Long-Term Disability Benefits is full of insights and answers for people who need to manage their own long-term disability claim—from the initial application for benefits to appealing a claim denial.
I wrote this Guide is to give you a comprehensive overview of long-term disability benefits in Canada. I cover all the main topics, so you can easily scan to find the information you need. I include links to more specific content in case you want to take a deeper dive into any topic.
Read it now to build a plan for managing your long-term disability claim, so you can avoid unnecessary delays or denials of payments.
Long-term disability benefits are monthly income-replacement payments made to a person who is unable to work because of a disability.
To be eligible for benefits, you must be a covered person under a disability plan. The disability payment is based on a fixed amount (e.g., $2,000 per month) or is calculated as a percentage of your salary (e.g. 66% of salary).
Long-term disability can be paid for several years. This can be for a set number of years (e.g., 2, 5 or 10 years) or it can be until you reach a certain age (usually 65 years old).
All long-term disability benefits have a waiting period.
The payments do not start right away. You must be continuously unable to work for several months before you can qualify for benefits. During this qualification period (waiting period) you can get short-term disability benefits or EI sickness benefits.
If you become unable to work because of a medical condition, you can apply for benefits from your long-term disability plan.
You begin the process by sending an application to the plan administrator, which is almost always an insurance company. This is called making a claim.
The insurance company will review your application and decide to approve or deny your claim.
Before we go any farther, it is important to clarify what I mean by “long-term disability benefits” in this Guide. I am referring to long-term disability paid under an insurance policy or other workplace benefits plan.
This Guide is focused on two types of long-term disability plans:
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.
Nonprofit disability plans are often not based on an insurance plan.
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. Nonprofit plans are based on a document called “the Plan Text,” which looks like an insurance policy.
Nonprofit disability plans are usually run by a board of directors. These boards of directors usually hire an insurance company to administer the plan on their behalf.
Things get complicated because sometimes the non-profit board of directors will buy a group insurance policy, or something that is very close to a traditional group insurance policy.
Nonprofit plans usually have more procedures and harsher deadlines than insurance-based plans. Many members of nonprofit plans wrongly assume it is an insurance-based plan because it is being administered by an insurance company.
Following is a list of long-term disability insurance companies in Canada:
Disability insurance companies are members of the Canadian Life and Health Insurance Association (CLHIA).
Following is a partial list of non-profit long-term disability plans in Canada:
Most Canadians are not eligible for long-term disability benefits. To be eligible, you must have bought an insurance policy or be a member of a group that is covered by an insurance policy.
Employees and union members are the most common groups covered by a long-term disability plan. If your employment includes a group benefits plan, then it is possible that it includes disability coverage.
If you are self-employed, you would need to have purchased a long-term disability plan from a broker or through your professional association to qualify.
If you are covered under an individual or group policy, then you may qualify for benefits if you meet the disability requirements under the plan.
All disability plans are based on the concept of total disability, partial disability, or both. What counts as partial or total disability depends on the wording in each policy or plan. Each plan will have different wording, so you need to understand the wording that will apply to you.
Even if you meet all the above criteria, you may still be ineligible for disability benefits if you fall under any of the exclusions for coverage. The term exclusions refers to situations where the plan will not cover you. The most common exclusion we see is for pre-existing conditions.
Most disability plans will have a pre-existing condition clause. This means that the plan will limit claims based on medical conditions you had before you enrolled in the plan. There are two types of exclusions: 1) full exclusion and 2 limited exclusion.
The full exclusion means that plan will not cover you for a disability caused by a medical condition you had before enrolling in the plan. For example, depression and anxiety are commonly excluded conditions.
The limited exclusion will only exclude pre-existing conditions if a claim is made within the first one to two years after you enrol in the plan. This is called the pre-existing exclusion period. Once you pass this exclusion period, you are free to make a claim based on the pre-existing condition.
You can learn more from the Financial Consumer Protection Agency of Canada's page on disability benefits.
I am often asked what medical conditions qualify for long-term disability. The simple answer is that virtually any condition can potentially qualify if it causes you to experience “total disability” as defined by your policy.
Long-term disability is based on the seriousness of your symptoms, not the seriousness of the medical diagnosis. The focus is on whether the symptoms cause you to be unable to perform the essential duties of your work, or any other work.
Your medical condition or diagnosis is still important because it allows for specific treatment plans. If your diagnosis is unknown, then it is harder for doctors to come up with a treatment plan. In these situations, much of the effort is focused on testing to rule out possible diagnoses.
It is critical that you cooperate with testing to rule out possible conditions. Insurance companies do not like it when there is no clear diagnosis or treatment plan. If they don’t see you working to figure it out, then they will deny your claim or stop payment of benefits.
Following are common medical conditions that may qualify for disability benefits:
We are often asked about the rules that apply to long-term disability, but the rules will vary based on your specific circumstances. The rules come from three sources:
Every disability insurance policy or plan is unique.
This is why it is dangerous to take advice from people who are covered under a different plan from you.
The only way to know the rules that apply to you is to get a copy of your long-term disability plan or policy. The easiest way to do this is via your group benefits booklet, which you should be able to get via your employer or union.
Long-term disability benefits are regulated province by province. Many provinces have very similar laws, but they are not exactly the same.
Beware of taking advice from people who may be referring to the laws of another province.
Finally, the last source of rules is the common law of Canada. The common law refers to judicial decisions in long-term disability disputes that came before the courts. These judicial decisions create precedents that must be followed in subsequent cases.
Applying for long-term disability insurance benefits is the same for everyone. This is one area where the insurance companies all follow the same process. You need to follow these steps:
The waiting period for long-term disability refers to the minimum time you must be continuously disabled in order to be eligible for benefits. The waiting period under most plans is 17 weeks, but can go as high as 52 weeks.
During the waiting period, you can get short-term disability benefits or EI sickness benefits. Under most plans, the waiting period is the same length of time you are eligible to get EI sickness or short-term disability benefits. This way there is no gap in income.
You will usually have to send in one or more forms to apply for long-term disability. If the same insurance company administers both the short-term disability and long-term disability payments, then you may need to fill out a transition form.
If you are applying to a new insurance company that doesn’t already have information about you, then you will need to fill out three forms:
These forms are essentially the same for all insurance companies, but you have to use each company’s own version of the forms or they can reject your claim.
First you fill out the Notice of Claim 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 gets all the completed 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.Short-term disability denial
If your short-term disability claim is denied, you still have the right to apply for long-term disability.
Sometimes insurance companies or employers will refuse to give you the forms when your short-term disability is denied. The excuse is that you haven’t been continuously disabled for the waiting period, and therefore do not qualify.
They have no legal right to refuse to give you the forms. You are allowed to apply for long-term disability and they can deny you for these reasons, but they still have to allow you to apply.
It is important that you not miss the deadline to apply for long-term disability while appealing a denial of short-term disability.
Also, you need a formal denial of long-term disability to trigger your legal rights. If you don’t apply for long-term disability, then you don’t have any legal rights to appeal or sue the insurance company for payment.
When an insurance company refuses to pay a claim, it is called a denial of benefits or long-term disability denial. A denial is justified if you do not qualify for benefits; however, if you believe you do qualify for benefits, then the denial can be erroneous.
All insurance companies have a process for people to dispute decisions made about their claim, including claim denials. This process starts with internal appeals and ends with a hearing before a final decision-maker.
The final decision-maker will come from outside of the insurance company and will be an arbitrator, judge or jury, depending on your plan.
Let’s review some of the key things you should know about appealing a denied claim for long-term disability.
To learn more about how to appeal, check out: How to Appeal a Denied Disability Insurance Claim.
The denial letter is an important document that includes the information you need to make your appeal. By law, insurance companies must put a denial of long-term disability in writing. They do this by mailing or emailing the denial letter to you.
The denial letter will often include the reasons for the denial. The reasons for denial are important because they can serve as the basis for your appeal. A common strategy of appeal is to challenge each reason for denial with new information or medical documents. The reasons for denial can serve as the issues your doctor can address in a new medical letter in support of your appeal.
Finally, the denial letter will conclude by informing you of your right to appeal and giving you a deadline to do so. This deadline may be a specific date (ex. by June 1, 2020) or a period of time (ex. within 60 days).
Depending you your disability plan, the deadline to appeal can be soft or hard. A soft deadline is one that doesn’t have legal consequences. For example, the insurance company may say that you have 30 days to appeal, but if you miss that deadline, you do not lose the right to keep appealing. On the other hand, there may be hard deadlines for appeal. Missing these deadlines may forfeit your right to pursue further action.
There are usually two levels of appeal. These include:
Let’s look at each level in more detail.
Your first appeal is called an internal appeal. This appeal is processed “internally” by the insurance company. A second employee of the insurance company will reconsider the denial decision made by the first employee. The new employee has the power to approve your claim.
With insurance-based plans, there are no procedures or rules for internal appeals. The denial letter is the only document that explains the deadlines and process. The deadlines are usually soft. You won’t lose your right to appeal if you miss a soft deadline. With nonprofit plans, you are more likely to see formal appeal procedures and hard deadlines. If you miss a hard deadline, you can lose your right to appeal.
Insurance companies allow two to three rounds of internal appeals. If you are unsuccessful with internal appeals, you can move on to the next appeal level: an appeal hearing or lawsuit.
Whether you proceed with an appeal hearing or a lawsuit will depend on your disability plan. Some nonprofit disability plans will require you to do an appeal hearing with an arbitrator, with no option for an appeal by lawsuit. With insurance-based plans, often your only option is to make an appeal by lawsuit.
To learn more about internal appeals, check out: 4 Reasons to Avoid Disability Claim Internal Appeals
Appeal hearings generally occur with nonprofit disability plans involving unions. Insurance-based disability plans do not have hearings or arbitrations. Those plans use the lawsuit process as the final level of appeal.
If your disability plan has an appeal hearing, it may be your final level of appeal. The decision at the appeal hearing would be final and is binding on you and your insurance company.
The appeal by lawsuit is the final level of appeal for all insurance-based disability plans and some nonprofit disability plans.
This means that your appeal is handled in the context of a lawsuit and a judge or jury will be the final decision-maker. The judge or jury’s decision would be enforced on you and the insurance company.
In a lawsuit, you can claim other damages in addition to the disability benefits owed under the policy. These other damages may include compensation for mental distress caused by the wrongful denial of benefits.
You can also get compensation for other financial losses caused by the denial, including legal costs. Examples include interest paid on loans or losses from the forced sale of a house.
During the appeal by lawsuit, the insurance company continues to evaluate your claim and can choose to approve you for benefits before your case goes before a judge. If that happens, you can choose to stop the lawsuit, or you could continue to court to ask for compensation for mental distress and other financial losses.
During an appeal by lawsuit, you may have the option to settle your claim for a one-time lump sum payment of past and future benefits.
The insurance company would make a one-time payment to you in exchange for your dropping the lawsuit and giving up all rights under the disability plan. You have to weigh the pros and cons of lump sum settlements. Such settlements are typically limited to five to seven years of future payments.
You still have to deal with the insurance company after they approve you for long-term disability.
The insurance company will monitor your medical condition and treatment. They will ask for regular updates or reports from your doctor. They may require you to see their doctor or enrol in a treatment program of their choosing. It is your responsibility to abide by the rules of your insurance policy.
To keep disability benefits, you must carefully manage your relationship with the insurance company. You will need to do what they ask, even if you disagree with it.
All disability plans make payment of benefits conditional on you giving them ongoing proof of total disability.
The insurance company will continue to monitor your medical condition for years after approving benefits. They will require you to send in medical updates and reports from your doctor on a regular basis. They will continue to phone you for updates. Such requests tend to be more frequent the younger you are, or if they expect your medical condition to improve.
The insurance company has a legal right to perform this ongoing medical review. You have to cooperate with them or they have a right to stop your payments.
Once you are approved for disability benefits, the insurance company can require you to attend treatment or rehabilitation programs. The goal of rehabilitation is to get you back to work. They can’t force you to attend the treatment, but if you don’t, they can stop your payments. You should expect your insurance company to require you to attend treatment. Common examples include physiotherapy, occupational therapy, and psychological therapy.
Most disability plans allow the insurance company to send you to a doctor for evaluation. These medical evaluations are commonly referred to as Independent Medical Examinations (IME).
These are one-time examinations focused on getting a medical-legal opinion from a doctor. The doctor does not provide treatment and is not a replacement for your own doctor or specialist. After the examination, the doctor will send a report to the insurance company answering their questions and giving opinions on your medical conditions, treatments and disability.
It is common for people to not want to attend these medical examinations. Common objections are that it may be too far to travel; that the doctor’s speciality doesn’t fit with your condition; that the doctor will say negative things about you or that the doctor has terrible reviews online.
While these are valid concerns, you still need to attend the examination. The insurance company has the right to choose the doctor, even if you disagree with their choice. Failing to attend an examination will result in them stopping your payments.
Go to the medical examination in good faith, even if the doctor has bad online reviews. You may be pleasantly surprised by the results. Sometimes the doctors will give opinions that support your keeping disability benefits.
It is common for long-term disability benefits to be offset by income you get from other sources. By offset, we mean that the insurance company can reduce your disability payment by exactly the amount you get from other sources.
For example, if you start getting a CPP disability payment of $975 per month, then the insurance company can reduce your long-term disability payment by $975 per month. Common offsets include any money you get from workers' compensation, personal injury settlements, or employment severance payments.
For more information, check out: 6 Reasons to Apply for CPP Disability, Even Though Your Insurance Company Gets All the Money
To read more about the steps you can take when your insurer has overpaid you, read our article: LTD Overpayment because of CPP Disability Retroactive Payment: What are my options?
Many long-term disability policies and plans have clauses that require you to apply for other sources of disability benefits, if you are entitled to do so.
So, what happens is that after the insurance company approves your long-term disability benefits, it contacts to you say that you must also now apply for disability benefits from one or more other sources. Usually, the insurance company will also say that if you don't apply, then will still estimate and deduct the benefit amount from your long-term disability payment (yes, this is often legal under most insurance plans).
Common examples of other disability benefits, include CPP disability, worker's compensation, medical or disability pensions under your pension plan, and other disability insurance policies.
The most common situation is that your insurance company will ask you to apply for CPP disability benefits. When presenting this to you, it is possible your insurer will say that they won't start "estimating and deducting" your potential CPP disability benefit as long as you are pursing a claim (and appeal) for CPP disability AND you agree to sign a form called: Irrevocable Consent to Deduct and Pay an Insurer. To learn more about this, check out our article that discusses the pros and cons of signing the Irrevocable Direction to Deduct an Insurer.
Many people are surprised to learn that insurance companies hire private investigators to spy on people getting benefits. The younger you are, and the higher the amount of your disability payment, the more likely you are to be put under surveillance.
In my experience, surveillance rarely shows dramatic evidence a person is lying about being unable to work. However, if you are not careful about how you describe your physical and mental limitations, then the video can show discrepancies between what you have said you can do, and what you are shown to be doing on a video.
Such discrepancies undermine your credibility, which is often the goal of the insurance company.
Video surveillance is legal as long as it is done in public spaces or from a public space. For example, an investigator can record you on your property as long as they are on the public sidewalk or road in front of your house.
Online surveillance is limited to the investigator viewing information that is publicly available online.
One of the most common questions we get is, “Can my employer terminate me while I am on long-term disability?”
With some exceptions, employers can terminate an employee whenever they want, as long as the termination is not for a discriminatory purpose. For a termination to be legal, the employer must give the employee reasonable notice of termination, or pay severance in place of reasonable notice.
In our experience, most employers will not immediately try to terminate an employee who is on long-term disability. While the employer has the right to do so, it can be difficult for them to prove that the termination is not related to discrimination based on disability. Most cautious employers will therefore allow the claimant to remain employed on an approved sick leave for up to two years.
After two years, some employers will terminate the employee if they are permanently incapable of returning to work in any capacity. This is a termination based on the doctrine of frustration of employment contract.
There are some exceptions, but in the majority of cases an employer can terminate employment based on the doctrine of frustration. Termination under this rationale does not require notice, so the employee may have no right to severance pay. Always get independent legal advice when faced with a termination of employment
To learn more, check out our page on employment rights and disability benefits.
Each province has a government agency that regulates insurance companies. If you need to file a complaint against an insurance company, then you need to send it to the regulatory agency for your province.
Let’s conclude with some quick answers to the most common questions people ask us about long-term disability benefits:
Most disability plans will allow you to travel out of the country for a short time. They will put restrictions on travel lasting more than a few weeks, or permanent moves out of country. They can’t stop you from moving, but they can stop your disability payments. Most plans have a section that discusses the rules for travel. You should read what your plan says about travel before planning your trip, because the rules can vary wildly.
Not always. It depends on your plan. If you are self-employed and have a private disability policy, then it is not taxable as income. If you have a group plan through your employment, then your plan will be taxable if your employer pays more than 50% of the monthly premiums for your benefits.
If the underlying benefits are taxable as income, then the portion of any lump sum settlement that can be designated as “past benefits” will be taxable as income. Any portion of the settlement designated as future benefits will not be taxable as income. The rules about taxation can change, so make sure to always get independent advice before accepting a lump sum settlement.
Long-term disability benefits start after you have been continuously disabled for the required waiting period. This waiting period is usually three to six months. It is common for people to receive short-term disability benefits or EI sickness benefits during the waiting period.
Not really. The law recognizes that you have a right to a complete copy of any medical records created in a doctor-patient relationship. Independent Medical Examinations, however, do not create a doctor-patient relationship. Therefore you do not have an absolute right to the records. Under privacy laws in Canada you have a right to access your personal information, including the personal information arising from the IME. The doctor’s opinions and observations are not considered your personal information. In this case, the doctor could give you the report, but choose to black out or redact the portions that do not constitute your personal information.
Depending on what you need done, hiring a disability lawyer can cost as little as $50 or as much as $100,000 in extreme situations. You can hire disability lawyers under different fee arrangements, such as hourly rate, fixed fees, or contingency (no-win, no fee). Generally speaking, the amount you will pay will depend on two factors: 1) The amount of financial risk to the lawyer and 2) the scope of the work you need done. For a more detailed review of the costs of hiring a disability lawyer, check out our article: How much does it cost to hire a long-term disability lawyer in Canada.
Hiring a lawyer is an important decision, but it is not always the right decision for everyone. Depending on your specific situation, you may be able to succeed in applying or appealing your claim on your own. To help identify situations where you might not need a lawyer, or to learn more about potential problems that you may encounter when hiring a lawyer, take a look at our article "Problems with Hiring a Lawyer for Your Disability Appeal."
This is certainly a stressful situation. There are many reasons that a doctor might be hesitant to fill out the forms for you, and there are a couple of different things you can do in these situations. You can read more about this here: What to do if your doctor won't fill out disability Medical Report forms.
Still feeling unsure about your long-term disability claim?
Sometimes a quick call with us can help you move forward with confidence. Call us at 1-888-732-0470 or click on the chat icon to start a conversation.