How Do Insurance Plans Define Disability?

Every insurance company defines disability differently. That said, they primarily focus on whether you are unable to do any job or just the tasks for your current occupation.

A long-term disability insurance policy categorized as an own occupation is one where you receive benefits if you are unable to do the primary tasks associated with your current occupation. For example, if you are a surgeon and sustain a permanent injury to your hands, you may be unable to do the primary work associated with your job and may be able to replace your income through your own-occupation policy.

With an any-occupation policy, you must prove that you are unable to do any job for which you have training and experience performing in order to replace your income through the policy.

While own-occupation policies are sometimes available through an employer’s group policy, they usually change the definition of disability after two to five years. When this happens, they go from being an own-occupation policy to an any-occupation policy, and the policyholder must prove that they may not do any type of work to continue receiving compensation.

That said, you may purchase an own-occupation plan that does not change in definition, and there are a couple of reasons why it may be beneficial to do so:

• Tax Ramifications: when an employer pays all, or even part, of your premiums for LTD insurance, you are responsible for paying taxes on your disability income. If you have your own policy and pay all of the premiums, though, your disability income should be tax-free.
• Smaller Pay Cut: if you earn a high income where changing careers would require you to take a significant pay cut, paying for your own LTD policy may make sense for you. Added to that, the tax advantage for paying your own premiums may get you close to your take-home pay.

Offsetting Income From Other Policies

There may be other policies into which you have been paying, such as the Canada Pension Plan (CPP). In order to qualify for these plans, you must be unable to work any type of job.

If you do qualify, they may be able to get you closer to replacing 85% of your income, the maximum amount you may typically replace through disability coverage. However, you should know that if you begin receiving compensation through other insurance policies, your LTD insurance provider may reduce the amount of income you receive through your LTD policy.

Questions You Should Ask About an LTD Policy

If you are considering purchasing an LTD policy for yourself or just want to learn about the policy that is currently available through your employer, there are a number of questions you should ask of the insurance agent or plan administrator:

• How the insurance plan defines disability
• Whether you may increase your coverage without a medical exam
• Whether you may be responsible for paying your premiums if you are receiving disability income
• How soon you may start receiving benefits if you become disabled by illness or injury
• Whether the benefits you receive may be adjusted for inflation over time
• Whether the plan covers partial disability

LTD Denial Claims

According to Benefits Canada, LTD claims are frequently denied in Canada. While we do not know the statistics for private insurance companies, it stands to reason that they would be at least as high, if not higher, than CPP.

We tell you this not to discourage you from purchasing an LTD policy or cause you to feel discouraged if you have received a denial for your own claim. We tell you this to reassure you that denials are frequent and that many people have successfully appealed denials and are now receiving regular benefits from their LTD insurance company.

However, you should know that appeals cases may be extremely complex. There are a number of different avenues you may take to appeal the denial, and choosing the right one is important, as it may have a big impact on whether you are successful with the appeal. Some of the routes for appeal are also time-consuming. If you let the clock run down, you may lose the option of using other strategies to obtain compensation from the insurance company.

A disability lawyer may help, though, by eliminating the confusion you may be feeling by explaining the process and all of your options for appealing the denial. They are familiar with the jargon, the contracts that some Canadians have with insurance companies, and all other aspects of the process.

If the insurance companies have denied benefits for you or someone you love, you have the right to appeal the decision. Contact Preszler Injury Lawyers today at 1-800-JUSTICE for a free initial consultation of your case.