Area of Law: Insurance Law
Answer # 2739
What is the difference between short-term and long-term disability insurance?Region: Ontario Answer # 2739
Disability insurance, sometimes called disability income insurance, covers an individual for loss of income due to a disability, which may be due to a physical injury, an illness, or a psychological disorder. Many people have a short-term or long-term disability policy through group insurance provided by an employer. These plans can also be purchased as part of a private or individual insurance policy.
What coverage is available with both short-term and long-term insurance varies depending on the policy. Each policy will include details such as:
- how much you will receive (usually between 60%-85% of your income)
- the maximum amount could be paid (e.g. $5000 per month)
- the definition of “disability”
- how long you will receive benefits
- any limitations or exclusions preventing you from receiving benefits (e.g. pre-existing medical conditions)
- the cost of extra coverage
Short-term disability insurance
Short-term disability (STD) insurance will help cover expenses for a short period of time after your sick leave runs out if you are employed. They typically last for up-to 6 months while you are sick or injured and temporarily unable to work, although some benefits could be paid for up-to a year. The employer usually pays for these policies, although some employers choose not to provide short-term disability benefits, and employees rely instead on Employment Insurance (EI) disability benefits. STD benefits are usually about 70% of an employee’s regular earnings.
Long-term disability insurance
Long-term disability (LTD) coverage begins after short-term disability or EI benefits run out. The illness or disability usually means the individual is completely unable to return to work. Depending on the policy, benefits can cover income replacement as well as coverage for medical treatment and rehabilitation. LTD benefits are paid for a much longer period of time than short-term, usually for up-to two years if you cannot work at your regular job or occupation. If, after two years you are unable to work at any job, you may continue to receive benefits until you turn 65. It is important to note that the amount of your LTD insurance benefits will be reduced as soon as you begin getting other sources of disability income, such as Canada Pension Plan (CPP) disability benefits or Workplace Safety and Insurance benefits (WSIB).
Regular job or occupation refers to the main duties of the job the employee had at the time the disability started.
Any job or occupation refers to the duties of any job for which the employee is reasonably suited. Employees will not qualify for LTD benefits if they can work in a different job from the one they had before the disability, based on their training, experience and education.
There are also policies that provide additional coverage, such as a cost of living adjuster, which helps protect the benefit from inflation while the person is disabled, and a lifetime benefit, which pays a monthly benefit from age 65 for life while the person remains disabled. The amount of the lifetime benefit is usually less than the LTD benefit amount.
Get legal advice and help
Filing a claim for LTD can be a difficult, confusing and lengthy process. Each policy is different. A personal injury or disability insurance lawyer can help you understand your policy, notify you of any deadlines, guide you through the claim process, and deal with the insurance company. This will help ensure that you will get the benefits you deserve in a timely manner. Even when an individual has a legitimate cause for claiming their long-term disability benefits, often insurance companies will initially deny the claim, or offer an amount much lower than asked for. If you or someone you care about suffers from a long-term disability and has disability insurance, contact a personal injury lawyer. They can help you get the long-term benefits you are entitled to, even if your claim was denied.
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