If you have a long-term disability (LTD), you may be wondering if you should get an Own-Occupation LTD insurance plan. Receiving disability insurance through the Financial Consumer Agency may be beneficial if you earn a high income. An own-occupation policy may replace up to 70 percent of your regular pay. However, since you pay the tax premiums yourself, the income you receive when using your disability benefits may be tax-free, thus closer to your regular take-home pay.
Any-Occupation Policies Versus Own-Occupation Policies
Every LTD insurance policy is different. It is important to talk to your insurance agent about whether any policies you have or are considering defines a disability as ‘any-occupation’ or ‘own-occupation.’
Any-Occupation LTD Insurance Policies
Your employer’s group policy may offer an any-occupation LTD insurance policy, in which you may only receive compensation if you are unable to do any kind of work. It may replace 60 to 70 percent of your income as long as you prove that you are unable to work any job.
Own-Occupation LTD Insurance Policies
This type of policy may replace between 60 to 70 percent of your income if you are unable to do the primary tasks associated with your current role. For example, if you are a surgeon and hurt your hands in an accident you may be able to replace up to 70 percent of your income through an own-occupation policy.
Own-occupation policies are sometimes available through an employer’s group policy. However, if you are wondering, ‘Should I get an Own-Occupation LTD insurance plan?’ there are two complications you should be aware of.
First, if your employer pays part or all of your insurance premiums, you may be required to pay taxes on any income you receive through disability insurance. On the other hand, if you pay for your own premiums entirely, the income you receive should be tax-free, bringing you closer to your regular take-home pay.
Secondly, own-occupation LTD insurance through a group policy typically changes in definition, becoming an any-occupation policy after two-to-five years. That means you may need to prove to the insurance company that you are unable to do any kind of job in order to continue receiving benefits.
There are own-occupation policies that do not change in definition. However, these are typically limited to individual purchases and generally cost more.
How Other Disability Policies May Impact Your Compensation
It is possible to replace up to 85 percent of your income through multiple insurance policies. For example, you may be eligible for benefits through the Canada Pension Plan (CPP). To qualify for compensation through some policies, you must have been paying into them prior to becoming disabled, and you must prove that you are unable to work any kind of job.
Though these policies may help you get closer to replacing 85 percent of your income, you should be aware that any income you receive from other policies may offset the income from an own-occupation LTD insurance plan, thereby reducing what it is paying you individually, unless the policy states that income for other sources will not reduce your entitlement.
When Insurance Denies Your Claim
Insurers in Canada often deny LTD insurance coverage. The CPP has a 60 percent denial rate, one of the highest in the world according to a 2014 Huffington Post article, on the denial of disability benefits. Many private insurers do not provide their denial statistics, but it stands to reason that they are at least as high, if not higher.
However, appeals are as common as denial rates. Many people who receive disability income today began their journey with a denial letter, so if this does happen to you or someone you love, and you are still wondering, if you should get an Own-Occupation LTD insurance plan, know that you are not alone and have options.
A disability lawyer may be able to evaluate your situation and help you explore options for recovering benefits. They understand the insurance jargon, the contracts that many Canadians hold with insurance companies, and the appeals process. If you qualify, they may be able to help you navigate the process and pursue compensation from your insurance provider.
If you live in Ontario, Canada, and have received a denial letter or know someone who has, the team at Preszler Injury Lawyers is here to help. For a free initial consultation to review your case, contact Preszler Injury Lawyers today at (416) 364-2000.