If you have wondered how much of your income LTD will replace, you should know that long-term disability (LTD) insurance typically replaces 60 to 70 percent of your regular income. If you have multiple insurance policies, however, LTD may be able to replace between 60 to 85 percent of your income.
Replacing your income with long-term disability benefits, as well as the amount that you replace, depends on your insurance policy’s definition of disabled. Every company has its own definition of disabled, so it is important to establish right away how your policy—or any policy that you are considering purchasing—defines disability.
That said, some policies typically follow an own-occupation or any-occupation definition.
Own-Occupation Policy Versus Any-Occupation Policy
An any-occupation policy is one that only provides benefits if you are unable to do any job. Under this type of definition, you may not qualify for benefits if you are able to perform the work for any job that is different than the one you held before acquiring your disability.
An own-occupation policy is one where you may receive benefits if you are unable to do the work required for your regular job, the one you held at the time of your injury or illness.
However, it is important for you to know that some own-occupation policies that are part of a group policy change the definition for disability after two to five years. In other words, after a specified period of time, they change to an any-occupation definition, and you must prove that you are unable to do any job in order to continue receiving your benefits.
There are own-occupation policies that do not change the definition, although they are usually more expensive and typically must be purchased individually by the policyholder. If you earn a high income, though, where changing careers would cause you to have a substantial pay decrease, you may want to consider it.
By purchasing your own plan and paying for the premiums yourself, your disability income is tax-free. If your employer paid even part of your disability insurance premiums, you may be responsible for paying taxes on the disability income. Even though you only receive up to 70% of your regular pay through your LTD policy, the tax benefits of purchasing your own policy could actually bring your disability income closer to your regular take-home pay.
How Multiple Policies Impact Your Disability Income
When you have multiple disability insurance policies, you may be able to replace up to 85% of your regular pay. Some other policies or plans that you may have paid into include the Canada Pension Plan (CPP). In order to qualify, you must have contributed to these plans, and you must be unable to work any job.
It is important to note, though, that if you begin receiving disability income through other plans, your LTD insurance provider may reduce the amount of income you are receiving through that policy.
Denied Long-Term Disability Claims
Canada has one of the highest denial rates for disability claims in the world. According to the Huffington Post, CPP’s denial rate is approximately 60 percent. While we do not know the statistics for private insurance providers, it is safe to assume that they are as high or higher than CPP’s.
We do not say that to discourage you—quite the opposite. We want to reassure you that if your insurer has denied your claim, you have other options. In fact, many people who today receive benefits began with a denial letter from their insurance provider. They just chose not to accept the decision and hired a lawyer.
You should know, though, that the appeals process is complex and that there are multiple routes you could take to appeal the decision, some of which are extremely time-consuming. If you take one of the more time-consuming routes for appealing the denial, the clock could run out on other options for recovering compensation, which could limit the options you have.
However, if you qualify, a disability lawyer may be able to help you navigate the complex claims process from start to finish.
A lawyer who has successfully worked on disability cases before—who understands disability laws—may be able to help you understand the appeals process and explain how to move forward with your claim. They may evaluate your background and establish whether you should qualify and then help you present your claims appeal for pursuing your long-term disability benefits.
If you have wondered how much of your income LTD will replace, or if you or someone you love has received a denial letter from the insurance company, you have options. For a free initial consultation and review of your claim, contact Preszler Injury Lawyers at (416) 364-2000.