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Long-term Disability in Canada: Online Guide for 2023

· · Long-term Disability

This is your online guide to long-term disability in Canada for 2022. If you are looking for a broad overview of long-term disability insurance, you have found the right article.

This article is based on my 17 years of experience as an occupational therapist turned disability lawyer. I cover all the key topics and include links to articles that go into greater detail.

Let’s dive in!

Long-term Disability Basics

What is long-term disability insurance?

Long-term disability is insurance that pays monthly benefits to eligible people who become unable to work because of a medical condition, injury or disability. The monthly payments are usually 65% of your pre-disability income. If your disability is permanent, payments can last until age 65.

Why is long-term disability insurance important?

Long-term disability insurance gives you financial protection from losing your income. You get monthly income replacement payments that allow you to pay bills and keep a lifestyle similar to what you enjoyed while working.

One in six Canadians will be disabled for three months or more by age 60. A 2019 insurance industry study found that 53,000 Canadians per year get approved for group long-term disability benefits. The reasons for disability included mental illness (Depression, Anxiety), chronic medical conditions (Chronic Pain, Fibromyalgia, ME / CFS, back pain, etc.) and injuries (car accidents, falls).

Without long-term disability insurance, you have limited options for long-term income support. You may qualify for CPP disability benefits, but those payments get capped at $1,457.45 per month.

Provincial disability benefits are another option for long-term financial support. However, you won’t qualify for these payments if you live in a household with another income earner or have savings or other assets.

Finally, if your disability was the result of a workplace injury, you might have disability coverage through a workers’ compensation program. But, these programs are limited to situations where your absence is caused by a workplace injury.

Long-term disability will pay benefits regardless of what caused your disability. There is no financial means test. You can get benefits — regardless of your household income. Therefore, disability insurance is the best way for workers to protect their income.

How does long-term disability insurance work in Canada?

Let’s now review how long-term disability works. To be eligible for long-term disability benefits, you must be a “covered person” under an insurance policy. This policy must be in place before you stop working.

To qualify for payments, you must meet your policy’s definition of “total disability”. The definition of disability is different in each policy. But generally, it will say that you become “unable to perform the essential duties of your own occupation, or any occupation, because of illness or injury.”

The payment amount is 60% to 75% of your regular income. The insurance company pays you monthly.

Long-term disability payments don’t start immediately. Most plans will require you to be continuously disabled for three to six months before you can start getting payments. This time frame is called the waiting period or elimination period. During this time, you can receive short-term disability benefits either through a group insurance plan or from the federal government’s employment insurance (EI) sickness program.

Following is a typical example of how it works:

  1. You are working and have long-term disability coverage through your employer’s group insurance plan
  2. You develop a chronic illness that makes it harder for you to work
  3. After several months of struggling at work, you become unable to perform the usual duties of your “own” occupation
  4. Your doctor gives you a medical note putting you off work on sick leave
  5. You go on sick leave and receive short-term disability benefits through your group insurance plan
  6. After three months, your short-term disability benefits end, and you start getting long-term disability benefits
  7. After two years, the definition of disability changes to require disability from “any” occupation
  8. Your doctor confirms that you are also unable to do any occupation
  9. You continue to get monthly long-term disability payments until you can return to work or reach the age of 65

This guide focuses on long-term disability insurance benefits in Canada. If you are looking for information about long-term disability in your province, check out our provincial guides:

Total Disability vs Partial Disability

Insurance policies have different definitions of disability. The two most common definitions are ‘”total disability” and “partial disability.”

Total disability means you cannot perform the essential or regular duties of your occupation or any occupation.

Partial disability means you can still work to some extent. Meaning you are able to do some of the important duties of your occupation (but not all), or your income has dropped by more than 20%. Partial disability is usually only available with individual insurance policies. All policies include total disability.

Change of Definition of Disability: Own Occupation vs Any Occupation

There are two types of “total disability.”

First, there is total disability from your ‘own occupation.’ This means you will be considered disabled if you are incapable of doing the essential duties of the job you had when your disability started. With group policies, it is common for this definition to apply for the first two years of disability payments.

Second, there is total disability from ‘any occupation.’ So, being unable to do your own occupation is not enough. To meet this definition of disability, you need to be unable to work in other jobs. However, the definition of “any occupation” is not literal. The other occupations must match your education, work experience and limitations. In most cases, the ’other occupation’ must be capable of paying at least 60% of your pre-disability salary. Therefore, it is possible to do some work and still meet the definition of ‘any occupation if you are not capable of earning 60% or more of your pre-disability income.

For a more detailed explanation, check out our article: ‘Change of Definition’ for Long-term Disability Benefits.

What medical conditions qualify for long-term disability?

Almost any illness or injury can qualify for long-term disability. Insurance companies do not approve claims based on a diagnosis. Instead, they focus on whether your medical condition causes functional limitations and impairments. 

For example, it’s possible to have the diagnosis of Multiple Sclerosis (MS) but not meet your insurance policy’s definition of disability. Many people with an early diagnosis of MS can still do the essential duties of their occupation. Therefore, they won’t qualify for long-term disability payments. However, they may qualify later on if the MS causes greater functional impairment and limitations.

A 2019 insurance industry study identified the distribution most common diagnosis for disability claims as follows:

  • Mental Disorders (30%)
  • Musculoskeletal (21%)
  • Cancer (13%)
  • Circulatory (7%)
  • Nervous System (7%)
  • Accidents (9%)
  • All others (13%)

Do not worry if you do not know where you fit in the above categories. They merely show the breakdown of the approved claim by medical conditions. It doesn’t affect the likelihood of your claim getting approved.

Check out our guides on winning disability benefits for specific medical conditions:

How to Buy Long-term Disability Insurance in Canada

In this section, I review what you need to know when buying long-term disability insurance or enrolling in a company plan.

I begin by reviewing the three types of long-term disability insurance. Then I discuss how to apply for disability coverage. I close with a list of questions you should ask when buying insurance or enrolling in a plan.

Girl looking at pamphlet that reads: Buying Disability Insurance.

3 Types of Disability Insurance

There are three types of long-term disability insurance:

  • Group
  • Individual
  • Special Purpose

Group Insurance

Group disability insurance is the most common. Employers purchase this policy to cover their employees as a group. You cannot buy it directly for yourself. However, when you join your employer’s group medical plan, you apply for it. You then pay premiums for it as part of your payroll deductions. Keep in mind you lose this insurance if you resign from your employment or get fired.

Individual Insurance

Insurance brokers sell individual disability insurance directly to consumers. This insurance only covers you and is not tied to your employment. You can take it with you if you change jobs. Individual insurance has a more extensive application and medical screening process. Once approved, you pay monthly premiums directly to the insurance company.

Special Purpose Insurance

Special purpose plans cover a wide range of situations when you lose your income because of disability:

  • Auto Insurance – pays income loss benefits if you are unable to work after a car accident
  • Creditor’s Insurance – covers your visa, loan or mortgage payments if you cannot work because of disability
  • Dismemberment coverage – pays a lump sum of money if you lose the use of a limb, hearing or vision
  • Critical illness – pays a one-time lump sum if you are diagnosed with a critical illness
  • Business overhead – pays a one-time payment or monthly payments to cover business overhead and expenses
  • Travel Health Insurance – reimburses medical expenses incurred while travelling

Disability Insurance Coverage: How Do You Enrol?

Applying for insurance coverage is how you enrol in a plan or policy. Without coverage, you cannot file a claim should the need arise. How you apply for coverage will depend on the type of disability policy:

Applying for Group Insurance Coverage

You apply for group insurance coverage through your employer, union or association. You are eligible to enrol because of your status as a full-time employee or member of a union or professional association.

The application involves filling out a form. If the group covered by the insurance is small, you may also have to fill out a medical questionnaire. Or undergo medical tests. With large organizations, there are no barriers to enrolment other than your status as a member of the group. Once enrolled in the plan, you are considered a covered person under the plan. If you later become unable to work, you can file a long-term disability claim under the insurance policy.

Applying for Individual Insurance Coverage

Applying for individual insurance is more complicated than group insurance. You will have to provide detailed information about your medical history and undergo a medical assessment and bloodwork.

The insurance company then reviews your medical information to determine if they will agree to offer you a long-term disability insurance plan.

If you have pre-existing medical conditions, it is possible those will be excluded under the policy. For example, you were treated for depression in the past but are currently not having problems. In this instance, an excluded medical condition means you would not be able to file a disability claim for depression. But could be for any other new medical conditions or injuries.

For more information, check out our article: Pre-Existing Conditions and Long-Term Disability.

Questions to ask when buying or enrolling in a long-term disability plan

The questions you should as are different depending on whether you are enrolling in a group or individual plan. I cover both below:

Questions for Group Insurance Plan

  • What percentage of pre-disability income will be paid? 65%, 75% or 85%?
  • How long is the waiting period for benefits to start? 3 months? 6 months? 12 months?
  • Does the plan pay short-term disability benefits during the waiting period?
  • How long do benefits last? To age 65?
  • How does the plan define “total disability”?
  • Does the plan include “own occupation,” “any occupation,” or both?
  • Are the monthly benefits taxable as income?
  • what types of other income does the plan offset?
  • How long is the pre-existing conditions exclusion period?
  • Are any medical conditions excluded?
  • Are any benefits limited by medical conditions?
  • Is there a waiver of premium for group insurance benefits while you are on an approved long-term disability claim?

Questions for Individual Insurance Plans

  • What is the benefit payment amount? Is it a fixed amount per month or based on a % of pre-disability income?
  • How long can benefits be paid? To age 65? Longer?
  • How is disability defined in the policy?
  • Is this an own occupation policy? Or does it go from ‘own occupation’ to ‘any occupation’ over time?
  • If it is an own-occupation-only policy, will I still get payments if I am able to work in another occupation?
  • Is there a partial disability clause? How long can one get partial disability?
  • Are there any pre-existing condition exclusions?
  • Are there any benefit limitations based on medical conditions?

Filing a Claim for Long-term Disability Benefits in Canada

Applying for Long-term Disability: Tips for success

You get long-term disability benefits by filing a claim with the appropriate provider(s). The provider is usually an insurance company. Filing a claim is also referred to as making an application for benefits.

Once you are ready, start the process by getting the application package from your employer or the insurance company.

The application package will include three forms:

  • Application Form (You fill out)
  • Medical Report Form (Your doctor fills out)
  • Employer’s Report (Your employer fills out)

Want to learn more? Check out our article on How to Apply for Long-term disability in Canada in 7 Steps.

Fill out the application form and send it to the insurance company. Your form will say exactly where to send it. Typically, your doctor and employer send their forms directly to the insurance company. Once you get all the documents, the insurance company will assign a claim representative. They will open a ‘claim file’ and assign you a claim number.

The claim representative will call you for more information. They may also ask you to send more medical records or documents. As a general rule, you should cooperate with them. It is in your best interest to keep a professional and cooperative tone in all interactions with the claim representative.

Once the insurance company has all your forms and documents, the claim representative will make a decision to approve or deny your claim. This can take months, depending on how long it takes to get them all the forms and documents they request.

If the representative approves your claim, you will start getting monthly payments. You may also get a one-time payment for past benefits owed.

Appealing a denial of long-term disability

You have the right to an internal appeal if your claim gets denied. An appeal means you ask the insurance company to reconsider its decision to deny your benefits. A long-term disability internal appeal means that the appeal is handled by employees of the insurance company. Each insurance company has its own process. You need to make this request in writing.

Finally, if the insurance company denies your internal appeals, you have the right to do an external appeal. External means that the appeal is handled by someone who is independent of the insurance company. In most cases, this will be a judge in your province. However, some plans have different procedures. So, it could be an arbitrator.

When you do an external appeal, it can involve filing a lawsuit against the insurance company. However, this is still an external appeal. So, the insurance company can decide to approve your claim before it gets to court.

The insurance company could also negotiate a one-time settlement with you. This is called a lump-sum settlement. I will discuss that in the next section below.

For more information on how to appeal, check out our article on Long-term Disability Denied: How to Appeal in 7 Steps.

While you’re at it, take a look at our article: ‘Will I Have to Pay My LTD Insurer’s Legal fees if I Lose My Case?‘ where we discuss what happens if you win or lose your legal appeal.

Lump-sum Settlements for Long-term Disability

Insurance companies sometimes pay settlements. In other words, you would get a one-time payment for past and future benefits instead of monthly payments. Settlements are most common during lawsuits or legal appeals. The insurance company will offer to settle rather than go to trial. They provide you with a one-time payment for past and future benefits instead of monthly payments. The settlement will not be the full value of your future payments. So there is a tradeoff. The amount administered in the lump sum settlement can vary widely from case to case.

Lump-sum settlements are less common for people receiving benefits. If you are on an approved claim, you shouldn’t try to get a settlement. That typically doesn’t work because insurance companies will only make the offer if they want to. And because they only do this when it makes financial sense for them. You can read our article on long-term disability lump-sum buyouts to learn more. 

After Approval of Long-term Disability

You still have to deal with the insurance company after they approve you for long-term disability. They will continue to monitor your condition and treatment. They may ask you to see a doctor. Or, they might enrol you in a treatment program. Ultimately, it’s your responsibility to follow the rules laid out by your provider.

So, to keep your 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. The following are common issues that happen after claim approval. 

Continuing medical review

You have to keep proving your disability even after you get approved. This is called continuing medical review. 

Typically, the insurance company asks your doctor for updates. They might ask every month or every six months. It might only be once per year. Whatever the case, the insurance company has a right to these updates. Therefore, you have to cooperate with them. Otherwise, they can stop your payments.

Treatment and rehabilitation programs

Insurance companies can force you to attend treatment and rehabilitation programs. For example, they might send you for psychological treatment. Or, they can enroll you in physiotherapy programs. Not every policy has the right to do this, but most do. So, make sure to check yours. They can’t force you to go, but they can stop payments if you don’t.

Independent medical examinations

Insurance companies can send you to a doctor of their choice. This type of exam is also known as an independent medical examination or IME.

The purpose of an IME is for the doctor to give an opinion. This doctor doesn’t treat you, however. So, they don’t replace your doctor or specialist.

After your visit, the doctor sends a report to the insurance company. In the report, they answer questions for the insurance company. The report also includes the doctor’s opinions about your conditions, treatments, and disability.

You might not want to see these doctors. Some common objections are that it’s too far to travel. Maybe the doctor’s specialty doesn’t match your condition. Another is that the doctor will say bad things about you. Perhaps they have terrible reviews online.

These concerns are certainly valid. But you still need to attend the exam. This is because the insurance company has the legal right to send you to their doctor. If you refuse to go, then they can stop your payments. 

Go to the medical examination in good faith, even if the doctor has terrible reviews. You may be pleasantly surprised by the results! Sometimes the doctors will give opinions that support you.

Holistic and Alternative treatments

It is very common for people who are on long-term disability to want to participate in every possible treatment to get better. And sometimes, that will lead them to try holistic or alternative treatments. However, depending on your policy and whether the treatment is approved by your doctor, you may run into problems with your insurance company.

For more information on this, check out our article: Can Long-Term Disability Insurers Reject Alternative or Holistic Treatments?

Offsets and integration of benefits

It’s common for insurance companies to reduce your disability benefit if you get other payments. In other words, they offset their payment — usually dollar-for-dollar. For example, let’s say you get a CPP disability payment of $900 per month. In this case, your insurance company reduces their payment by $900 per month.

Other offsets include money you get from workers’ compensation, personal injury settlements, or severance payments, to name a few.

For more information, check out:

Can the insurance company force me to apply for CPP disability?

Yes, an insurer can force you to apply for CPP disability. Again, the policy gives them this right. Most policies do this, but not all. Technically, you can refuse to apply for it. If you do, then they will guess what CPP would pay you. Then, they can deduct it from their payment.

They can also force you to apply for other benefits, including:

  • Worker’s compensation
  • Medical pensions
  • Other disability insurance policies

Surveillance

Insurance companies hire private investigators all the time. They do video and online surveillance. They try to get you on video doing things you said you could not do. Or, they find things online that make you look bad.

But you won’t always be under surveillance. It happens more if you’re young or if you have high payments. It also happens more if you have been getting benefits for over two years. Basically, they want to keep their money.

I have seen a lot of surveillance videos of my clients, and they rarely prove a person to be a liar. But they can show inconsistencies and insurance companies will make a mountain out of a molehill. For example, you might take five steps when you say you can’t walk. If they record you doing this, then it can hurt your credibility. Unfortunately, that is their goal: to make you look like a liar.

So, is it legal? Yes, as long as investigators stay in a public space. This gets a little weird. For instance, they can record you on your property if they are standing on a public sidewalk.

Online surveillance happens too, but it’s limited to the investigator viewing what’s publicly available online. Check out our article, Surveillance and Long-term Disability Claims, for more information.

Long-term Disability after two years

If you have been on long-term disability for more than two years, you will likely receive benefits based on an “any occupation” definition of disability. This means that the insurance company will pay benefits as long as it believes you are incapable of doing any type of work.

Not exactly “any” type of work, but any work that you can do and from which you could earn 60% or more of your pre-disability income.

Being approved beyond two years is not a guarantee that benefits will continue to age 65. The insurance company will continue to monitor your claim. It will ask for updates. You need to continue treatment when appropriate.

Return to work programs

At some point throughout your claim, the insurance company may ask you to take part in a return-to-work program. This program usually involves a gradual return to the workplace, which could include working at reduced hours or with modified duties while you get settled back into your former position.

The insurance company cannot force you to return to work. However, they can threaten to cut off your benefits. If you and your doctor agree that you aren’t healthy enough to return to work, you shouldn’t give in to their demands.

Now let’s suppose you and your doctor feel like you are ready to try to go back to work. In this case, we highly recommend doing so. Even if the return to work is unsuccessful, you can usually get your benefits reinstated. This is because most LTD policies have a recurrence clause that allows you to get back on benefits if the return to work fails as a result of the same disability. This clause also allows you to get your benefits reinstated without having to undergo another waiting period. However, its important to keep in mind that you can usually only claim recurrent disability within a certain time frame. Its usually between six to 12 months.

You should always speak with a disability lawyer before attempting a return to work. They can look over your policy and make sure it has a recurrent disability clause and help with any other issues that may come up.

For more information, check out:

Employment Termination and Long-term Disability

“Can I be fired while I am on long-term disability?” We get this question all the time.

Unfortunately, the short answer is yes. Generally speaking, employers can fire employees at any time. They can’t just fire you because of your disability — that would be a human rights violation. Legally, they have to provide termination or severance pay.

So, in some cases, you may have a legal claim against your employer. For instance, if you are terminated without severance pay. You would also have a case if you believe it was because of your medical condition or disability. In these cases, you can win compensation in court.

Most employers won’t terminate you if you’re on long-term disability because they know it looks bad. They want to avoid lawsuits and human rights claims. Therefore, cautious employers will allow you to be on sick leave for up to two years.

But, after two years, your employer may have the option to terminate you for cause. This means they would only have to pay the minimum severance allowed under provincial laws. This type of termination is based on the frustration of employment. This is a complicated area of law. If this is your situation, I urge you to get specific legal advice.

To read more about this, check out our articles:

List of Long-term Disability Insurance Companies and Public Sector Disability Plans in Canada

Disability Insurance Companies

Disability insurance companies are a private source of long-term disability benefits. They are all members of the Canadian Life and Health Insurance Association (CLHIA). You must be a member of an insurance policy to receive benefits. The following are all the disability insurance companies in Canada.

Public sector Long-term Disability Plans

The following is a partial list of non-profit long-term disability plans in Canada:

  • OHA Disability Income Plan (HOODIP 1992)
  • Ontario Teachers Insurance Plan (OTIP)
  • Nova Scotia Public Service Long-term Disability Plan (Manulife)
  • NSAHO LTD Plan (Manulife)
  • Nova Scotia Teacher’s Union LTD Plan (Manulife)
  • PEI Public Sector Group Insurance Plan (Great-West Life)
  • New Brunswick LTD Plan (Blue Cross)
  • New Brunswick Teachers Union LTD Plan (Manulife)
  • Newfoundland and Labrador Public Sector LTD Plan (Great-West Life)
  • PSAC LTD Plan (Sunlife)
  • SISIP LTD Plan (Manulife)

Complaints Against Long-term Disability Insurance Companies in Canada

Each province has a government agency that regulates insurance companies. If you need to file a complaint against an insurance company, you need to send it to the right agency for your province.

Long-term Disability FAQs

Let’s conclude with some frequently asked questions. The following are answers to the most common questions people ask us about long-term disability benefits:

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About David Brannen

A former occupational therapist turned disability lawyer, David has been representing people in disability claims for over fifteen years. David is Resolute Legal's founder and managing lawyer. He is the author of the best selling The Beginner's Guide to CPP Disability, the CPP Application Workbook and A Beginner's Guide to Disability Insurance Claims in Canada.

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