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Long Term Disability In Ontario (Simple Guide)

Who Gets Long Term Disability?

Long term disability (sometimes known as “LTD”) is a type of insurance some employers offer their employees as a “group benefit”.

Many employers who offer LTD to their staff pay all of their employee’s monthly premiums, while some employers require that their employees contribute to all or part of their LTD coverage.

It is optional and not required for Ontario employers to offer long term disability to their employees. There is no law requiring long term disability insurance in Ontario. Moreover, employers who offer LTD are not required to pay for it. Employers can technically pass on all the costs of an LTD plan to their employees.

Generally speaking, in my experience, group long term disability benefits are more likely to be offered by larger corporations and public employers and less likely to be offered by smaller employers. 

Nevertheless, individual employees can buy long term disability on their own if their employer does not offer a group plan. In this case, individuals should contact a licensed insurance advisor for more information. 

What Is Long Term Disability?

Long-term disability insurance provides employees with income replacement in case they suffer a disability and can’t work for, generally, six months or longer. 

Long term disability insurance covers disabilities that occurred both during work and off-work. 

As discussed above, long term disability insurance is for disabilities that generally last longer than six months long. In this way, long term disability insurance policies pay benefits usually after short term disability insurance expires. “Short term disability”, which is a separate benefit that most employers who offer LTD also offer, generally only lasts six months. So think of it this way: You normally go through three different “disability” schemes if you become disabled and can’t work and are fortunate to have disability insurance:

  1. If you are disabled for a really short time (e.g., a day or two), you go on sick leave and your employer pays you out of pocket (but it does not have to).
  2. If you are disabled for a little bit of time (e.g., a few days to six months), you go on short term disability benefits paid for by your insurer.
  3. If you are still disabled after six months, you go on long term disability benefits paid for by your insurer. You can stay on these benefits until the age of 65 if you are still unable to work because of your disability.

Payments: How Much Does Long Term Disability Pay? 

Most long-term disability plans do not pay an employee’s full income. In that regard, most LTD plans only cover a percentage (e.g., 80%) of base salary up to a specific maximum annual salary (e.g., $100,000). For example, someone who earns $180,000 per annum who has a long term disability policy that only pays 60% of income OR $3,000 per month, whichever is greater, would only earn $3,000 per month on long term disability even though they usually earned $15,000 per month before the disability. 

Moreover, most LTD plans do not pay variable income that often comprises a large portion of pay for salespeople and executives. 

Accordingly, highly paid employees generally only receive a fraction of their regular pay if they have to go on a typical long term disability policy plan. Those individuals should therefore consider (or speak to HR about) “executive long-term disability”, which has adjustable income caps and can pay variable monies.  

How Long Does Long Term Disability Last?

Unlike short term disability (which generally only lasts up to six months), long term disability benefits maintain until an individual is well enough to resume working or until the end of the coverage period (usually age 65), or whichever comes first. To that end, an individual could go on LTD for decades. There is no maximum time limit other than the terms of the plan, which is, again, usually age 65. 

Nevertheless, to remain eligible for LTD benefits, individuals must meet certain thresholds of “disability”. To that end, most long term disability policies generally provide LTD benefits for the first two years when the individual cannot work in her “own occupation“. However, after two years, long-term disability benefits are generally only paid if they cannot return to work in “any occupation“. 

An “own occupation” LTD policy means you are totally disabled and entitled to benefits if you cannot work in your usual occupation or your chosen employment field.

An “any occupation” LTD policy means you are totally disabled and entitled to benefits if you cannot work in any occupation you are suited to by education, training, or experience.

Therefore, an “own Occupation” policy is friendlier to the employee than an “any occupation” LTD policy because, unlike an “any occupation” policy, if you could return to work in another field, you could still receive your benefits.

This all means that after two years, a claimant has to go through the insurance company again to prove they are still eligible for LTD because they can’t work even in “any occupation”. At this stage, to determine a claimant’s disability to engage in “any occupation”, the insurance company will often arrange a far more in-depth assessment with an independent physician. 

Who Is Eligible For Long Term Disability Benefits?

First, to be eligible for LTD, an individual must have an LTD policy. As discussed above, not every employee in Ontario is a member of an LTD plan.

Second, Long Term Disability (“LTD”) insurance policies in Canada generally have a requirement that the employee must be “totally disabled” to be eligible to receive LTD benefits.

The exact definition of the term “totally disabled” will vary somewhat depending on the wording in an individual’s own LTD policy. However, generally, most LTD policies define “totally disabled” as, essentially, the following passage from the Supreme Court of Canada in Paul Revere Life Insurance Co. v. Sucharov:

The test of total disability is satisfied when the circumstances are such that a reasonable man would recognize that he should not engage in particular activity even though he is not physically unable to do so. In other words, total disability does not mean absolute physical inability to transact any business of one’s own occupation, but rather that there is a total disability if the insured’s injuries are such that ordinary care and prudence require him to desist from his business or occupation to effectuate a cure: hence if the condition of the insured is such that to effect a cure or prolongation of life, standard care and prudence will require that he cease work, he is totally disabled within the meaning of health or accident insurance policies.

Some examples of “totally disability” vis-a-vis long term disability include but are not limited to:

  • Brain injuries
  • Cancer
  • Chronic illnesses
  • Chronic pain
  • Neurological diseases
  • Orthopaedic injuries
  • Psychological diseases like depression

Who Makes The Decision To Allow Long Term Disability?

Long term disability is subject to a benefit plan’s terms and conditions with the insurance company, not the employer. 

Therefore, the insurance company, not the employer, administers long term disability claims. To that end, it is the insurance company, not the employer, who makes all decisions and payments concerning long term disability claims. Employers have no involvement in an insurer’s decisions and cannot influence them. 

How To Apply For Long Term Disability

The first step to apply for LTD is for the employee to get a copy of the LTD application form. Typically, employees get this document from their HR department. Otherwise, they should call their insurer directly. 

Next, the employee has to fill out the long-term disability application form that generally has the purpose of proving whether they are “totally disabled” or not. The employee’s own physician will have to complete a large part of this form. In many cases, at this stage, where it is clear from the physician’s report that the employee is “totally disabled”, there will not be much follow up or further medical appointments required. Note however that further medical documentation/appointments can and do come later as required by the insurer as time passes by.

After completing all application documents, most long term disability plans have a waiting or qualifying period where the employee is not paid. This period usually ranges from three to six months long (this is where an employee could be entitled to short term disability payments if they are fortunate to be enrolled in such a policy).

Following this waiting or qualifying period, if the employee is deemed “totally disabled” by the insurance company, they will begin to receive long term disability payments. 

If the employee has been denied long term disability by the insurer, they can appeal their decision a number of times depending on the language in the policy. Importantly, if a long term disability application is denied, the employee should consider calling an employment lawyer immediately. There are strict deadlines for filing an LTD appeal, and an experienced employment lawyer can significantly assist the employee in putting in the best appeal possible. 

What Happens To Long Term Disability When An Employee Is Terminated?

Employers have no obligation to keep an employee who is not receiving long term disability benefits enrolled in her long term disability plan if they are fired except for the minimum standard period of notice. This is one week of continued LTD eligibility for every year of service, up to a maximum of 8 weeks, following dismissal.

In case of termination, it is illegal to cut off long term disability coverage until the statutory minimum notice period is over.

However, some employment contracts will contemplate a more extended period for LTD coverage following termination, so employees should check their contract to determine exactly how long they will be covered after they are dismissed.

On the other hand, if an employee is already receiving long term disability benefits and is terminated from work following this, they can stay on long-term disability until they are no longer “totally disabled” or reach the end of the term, whichever is first. As an example, someone can become totally disabled, go on LTD for a number of years, then get fired, but stay on LTD until age 65.

Is Long Term Disability Taxable?

Long term disability premiums paid by employers are not taxable benefits. However, long term benefits received while on disability are taxable. 

Can You Be Kicked Off LTD?

Technically, an employee is entitled to stay on LTD so long as they remain “totally disabled”. However, sometimes after a few years, the insurer raises the argument that the insured is no longer “totally disabled” and is fit to return to work in the same or some other occupation. In this case, it is the employee’s responsibility to prove they are still “totally disabled”. If a disagreement still remains, it is advisable that the insured should contact a lawyer to challenge the insurance company.