Do you have a disability but remain unsure whether you’re eligible to claim or what long-term disability (LTD) benefits consist of?
With 27% of Canadians reporting one or more disabilities limiting them during the course of their daily activities, around eight million people must attempt to deal with the private insurance system. However, we’ve found that many Canadians aren’t receiving what they’re entitled to due to pervasive myths and misconceptions about how LTD benefits work.
In this guide, we’ll discuss some of the top myths about disability benefits and debunk them to support you in determining your eligibility for these payments.
Myth #1 – Only Physical Injuries and Disabilities Qualify
Despite attempts to reverse this misconception, thousands of Canadians continue to believe disability benefits are only for those with physical conditions. The truth is that any form of disability can qualify as long as it substantially hinders your ability to work. Examples include:
- Psychological disabilities
- Mental health disorders
- Emotional disorders
- Neurological conditions
- Degenerative illnesses
Today, mental health conditions actually make up a substantial number of disability claims. According to Sun Life, mental health is the single leading cause of disability, comprising 40% of all disability claims by women and 30% of all claims by men.
It’s partly why the rate of disability in Canada grew from 22% to 27% from 2017 to 2022, as people become more aware of the impact of mental health conditions. So, in short, the nature of your condition is irrelevant as long as you have medical evidence of your condition and it impacts your ability to work.
Myth #2 – Long-Term Disability (LTD) Benefits Provide 100% of Your Pre-Disability Income
LTD benefits are designed to provide financial stability when you cannot work, but they do not cover your entire pre-disability income. Most LTD insurance policies will pay between 60% and 75% of your pre-disability income. Some policies may be index-linked to ensure cost-of-living increases don’t reduce the value of your benefits.
The exact amount you receive varies based on the policy and how long you are paid will depend on the type of disability and its severity. Furthermore, depending on who paid the premiums, your LTD payments may be taxable.
However, this can be offset by applying for the Disability Tax Credit (DTC), which is a non-refundable tax credit designed to provide support for disabled Canadians. Your medical provider will need to certify on Form T2201 that you have a severe and prolonged impairment expected to last at least 12 months as part of your application.
The DTC is index-linked annually and so changes every year. In 2024, the federal DTC amount for adults was $9,872, excluding extra provincial amounts. Note that qualifying for the DTC may unlock access to other programs, such as the Registered Disability Savings Plan (RDSP) and the Canada Disability Benefit.
If you suffer from a mental or physical disability that regularly stops you from doing any type of substantially gainful work and is likely to continue for a long time, you may also be eligible for Canada Pension Plan Disability Benefits.
So, while LTD benefits alone won’t replace all of your income, qualifying can allow you to explore other options to offset the drop in your income.
Myth #3 – You Can’t Return to Work While Claiming LTD Benefits
That’s not true at all. If your condition improves and you believe you may be able to return to work, you are entitled to do so. Consult with your doctor if you have plans to re-enter the workforce. If they give you the all-clear, you’ll need to contact your insurance provider and advise them of your plans.
You’ll also need to report any income you receive during your return to work. It’s also recommended that you speak to a legal professional before beginning to work to understand any fine print within your disability insurance policy that could compromise your ability to continue receiving benefits payments.
Myth #4 – Having a Disability Guarantees Approval for LTD Benefits
One would think that having a disability means it would be a matter of filling out a few forms and waiting for the insurance company to approve payments. The reality is that around 60% of LTD claims are denied every year.
Your odds of seeing your claim approved depend on a range of factors, including:
- How your insurer defines the concept of disability
- The type of insurance policy
- The severity of your disability
- The type of disability you’re suffering from
- How often you speak to your doctor
- Are you in appropriate treatment for your disability
Insurers will often actively seek out reasons or evidence to challenge and deny your claim. Even with all of the right documents, your insurer may deny your claim, thus forcing you into a complex and stressful appeals process.
That’s why it’s strongly recommended that you contact a long-term disability lawyer to challenge a claims denial, so that you receive what you’re entitled to.
Myth #5 – LTD Benefits are Temporary
LTD benefits are temporary, but only up to a point, thus making this one of the few myths that has a grain of truth. Your entitlement to LTD payments depends on the specifics of your insurance policy.
The majority of Canadian disability insurance policies will offer payments to someone who meets the definition of “total disability” up to the age of 65. From that point, it’s expected that your government and private pension payments will take over.
Receiving LTD benefits means you must be disabled throughout the waiting period, otherwise known as the elimination period. This is essentially the time you must prove that you have a continuous disability before LTD benefits are paid. The waiting period may be as short as 90 days to as long as 180 days.
Myth #6 – If Your Claim is Denied, You’re Not Entitled to LTD Payments
Claim denial is the experience the majority will face. With up to 12% of the Canadian workforce off work due to accidents and disability at any one time, millions spend their time battling with their insurers.
Typically, insufficient medical evidence is the primary reason insurers deny claims. Getting approved requires comprehensive documentation. Another popular reason is the failure to meet the insurer’s definition of disability.
Depending on why your claim was denied, most insurers provide access to an internal appeals process. Again, this can be a source of frustration because insurers rarely change their original decisions unless you can prove a procedural mistake on their part or you can provide them with new medical reports or records which they did not have at the time of their decision. A denial of your application or appeal is not the end of your pursuit of LTD benefits.
The most effective way of challenging the original decision is to partner with a disability lawyer and file a lawsuit against the insurance company. Your lawyer will review your initial claim and your insurer’s written denial letter to determine whether you have a case.
Myth #7 – Only Full-Time Workers Qualify for Disability Benefits
Full-time workers are by far the largest group of people covered by disability insurance. The truth is that not all policies are restricted to those in full-time work. Some policies cover part-time workers if they work as few as 24 hours per week.
All policies have their own requirements for eligibility. You will need to obtain a copy of your insurance policy to determine whether you are entitled to make a claim for LTD benefits when you become disabled from your part-time position.
Myth #8 – LTD Benefits and Workers’ Compensation Payments are the Same Thing
Workers’ compensation and LTD benefits are often mentioned in the same breath. Unfortunately, this misconception also convinces some Canadians that there’s no reason to have an LTD policy at all.
It’s become a serious problem because just 48% of Canadians are covered under workplace disability insurance policies. Among workers whose employers don’t provide this benefit, 84% didn’t purchase a policy privately.
Workers’ compensation will only cover injuries and illnesses that directly relate to your work. For example, if you experienced a workplace accident that left you disabled, workers’ compensation payments would absolutely kick in. On the other hand, if you were hit by a bus on a weekend excursion, you wouldn’t be eligible for workers’ compensation benefits.
Disability insurance provides benefits whether you were left disabled by an incident inside or outside of the workplace. Another point to remember is that long-term disability policies cover a far greater range of conditions.
Myth #9 – Government Workers Can’t Receive LTD Benefits
Perhaps one of the strangest myths is the belief that government workers aren’t entitled to LTD benefits. Canadian federal government workers are eligible for these benefits. Typically, the schemes that federal workers use are:
1. Disability Insurance (DI) Plan – Designed to cover any employees involved in collective bargaining.
2. Public Service Management Insurance Plan (PSMIP) – LTD insurance for management and non-unionized employees, as well as executives.Myth #10 – LTD Benefits Are Only Useful for Older Adults
Another widespread problem is the continued belief that LTD benefits are only helpful for adults close to retirement age. The belief is that risk increases with age, so young people don’t have to worry about potentially becoming disabled.
The last nationwide survey on disability in 2022 might surprise you. Approximately one in five people between 15 and 24 had a disability, with one in four adults between 25 and 64 having a disability.
Disabilities can strike anyone at any time, and it’s vital that you have the proper coverage to replace your income if you cannot work. Remember, insurers evaluate disability based on your current ability to work. They cannot discriminate when assessing claims based on your current age. If you’re covered, you’re covered.
Myth #11 – LTD Benefits Are Easy to Access
The sad fact is that those with disabilities are so often failed by the coverage that should protect them when they’re unable to work. Disability insurance companies rarely make it easy for anybody to receive LTD benefits, even when you feel the evidence is clear.
Remember, it’s not in the interests of insurers to easily approve disability claims which could result in payments for years to come. Insurance companies are accountable to their shareholders and boards of directors and will rigorously examine claims before they are approved.
Suppose you’ve been denied LTD benefits despite the confirmation of your employer and healthcare provider. In that case, the best course of action is to contact an experienced disability lawyer to pursue your claim.
Final Thought
Disability coverage is designed to protect you from financial ruin should you no longer be able to work. Yet countless Canadians are not receiving what they’re entitled to due to persistent myths and misconceptions regarding eligibility, the nature of LTD benefits, and the claims process.
If you believe you’re eligible for LTD benefits, get in touch with a long-term disability lawyer to discuss your rights and your next steps.
