April 17, 2023

1 in 3 Canadians Will Become Disabled Before the Age of 65

Chris Lubell

What you must understand regarding your group long-term disability

Given that, on average, 1 in 3 Canadians will become handicapped for a period of more than 90 days at least once before the age of 65, having a source to replace your earned income in the case of a sickness or accident is essential.  The typical duration of incapacity for people who are off work for longer than 90 days is 2.9 years.

It's critical to comprehend the benefits of your coverage if you're one of the approximately 10 million Canadians who are protected by a group Long Term Disability plan (LTD). You might be in for a few surprises if you wait to read the employee handbook until after you become handicapped.

How much protection actually do I have?

  • Employee benefit LTD plans are often created to replace up to 85% of your after-tax income prior to incapacity.
  • There is a formula that determines how much you will receive. Knowing your own formula is a good idea because they can differ.

When will I begin receiving benefits?

  • Typically, after being disabled for 90 or 120 days, you become eligible for benefits to start.

Are my taxes taxable on this benefit?

  • You will receive the benefit tax-free if you directly pay the LTD payment.
  • In cases when the employer covers the LTD premium, the benefit will be taxable when received.  If this is the case, be careful to discuss your choices for having tax withheld if disabled with your employer or insurer so there are no unpleasant surprises at tax time!  Typically, after being disabled for 90 or 120 days, you become eligible for benefits to start.

What else should I be aware of before enrolling in an LTD plan?

  • Pay close attention to the NEM, or Non-Evidence Maximum.  The maximum disability compensation to which you would be entitled without supplying medical documentation is this amount.  
  • If you have a medical checkup, you can qualify for higher coverage.
  • Your LTD benefits may also be affected by any accident-related payments made under a car insurance policy.
  • Before a new employee is permitted to join the plan, there is often a waiting period of three to six months in most group plans.
  • If you previously participated in a plan through another employer, ask your new employer to waive the waiting time.
  • You should also make this request if you're an employee who was actively recruited or is seen as a valuable addition.

Exist other choices?

  • You might receive less disability income than you believed you were entitled to as a result of everything mentioned above.  If so, you might want to "top up" your coverage by buying an individual disability policy.
  • The majority of Group LTD plans do not offset against personal disability income policies, which is good news in this situation.

If you want to talk about your particular circumstance, please give me a call. Alternatively, you are welcome to use the sharing buttons to send this article to a friend or member of your family who you believe may benefit from reading it.

Table Of Contents

Related articles

Whole Life Insurance, A Whole New Asset Class

The Importance of Critical Illness Insurance in Retirement Planning

Has Purchasing Life Insurance Changed Since 2020?

Don’t Just have your Financial bases covered, Have them loaded