Making Sense of Your LTD Coverage

Frustrated by confusing LTD coverage, a man throws papers into the air

With life being as hectic as it is, it is just too easy to turn our minds from what appears to be the least-pressing issues at the moment. These issues may seem to include the fine print in your long-term disability policy. However, in the event that you become disabled, these mundane details can mean absolutely everything to you and your family. It is important to understand your long-term disability coverage before you need to worry about claiming benefits.

Total Disability

Becoming disabled can prevent you from working, robbing you and your family of financial security. Having Long Term Disability Coverage (LTD Coverage) offers peace of mind by protecting you from losing your livelihood due to a disability. After all, once the income stops flowing in, bills and other expenses of life continue to pile up. It is for this reason you should be aware of the different types of disability coverage available.

The particular plan you have (or may want to purchase) will determine the terms of the coverage available to you. Some plans’ definition of “total disability” are more comprehensive than others so be sure to ask questions of your insurance agent or plan administrator to fully understand your coverage.

Whether or not you meet the definition of “total disability” will depend on the type of coverage you have. This is why it is so important to understand how “total disability” is defined in your policy. While insurance policies can vary, some of the common “total disability” definitions available are set out below.

“Own Occupation” Coverage

If you cannot continue to work in your chosen profession, you may be eligible for coverage

This LTD Coverage is the most liberal definition for “total disability” you can have. Essentially, if you are unable to perform the important duties of your own occupation due to your disability, you may be eligible for this coverage.

One of the benefits of this coverage is that after becoming disabled from your “own occupation”, work that you subsequently perform in another occupation would not disqualify you from continuing to receiving benefits.

For example, if you are a dentist and can establish that you are no longer able to practice dentistry due to disability, you can pursue other employment options without affecting your coverage (i.e. teaching or research).

“Regular Occupation” Coverage

If you cannot maintain gainful employment as a result of your disability, you may be eligible for coverage

This coverage is similar to “own occupation” coverage, except that you cannot be working in any other gainful occupation to remain eligible. In other words, the insured is not considered totally disabled if he/she is working in another gainful occupation.

Take the previous example of the dentist claiming LTD Coverage under this definition after becoming unable to practice dentistry due to an injury and subsequent disability. Should this dentist start consulting as an alternative to practicing dentistry, this would disqualify him/her from entitlement to further “Regular Occupation” LTD Coverage.

“Any Occupation” Coverage

If you cannot maintain any type of employment as a result of your disability, you may be eligible for coverage

This is the least liberal “total disability” definition available. In order to meet “total disability” in this case, the insured must be unable to perform any gainful occupation. The question to be asked is whether the insured can work in their own occupation or any gainful occupation that they are reasonably qualified. If the answer is yes, and the insured is capable of working in even a single capacity, then there is no coverage available.

Using the same example as above, say you are a dentist with this type of LTD Coverage but can no longer perform the important duties of your occupation due to a disability. If your insurance company determines you are capable of performing some other type of gainful employment that you are reasonably qualified for (i.e. dentistry research or teaching) you will not meet the “total disability” definition.

Other LTD Coverage Considerations

There are pros and cons of purchasing LTD Coverage through a group plan versus a private plan. With most group plans, although the premiums are usually cheaper, the coverage tends to be less comprehensive.

For example, it’s common in group plans for the first 2 years of disability to define total disability as either “own occupation coverage” or “regular occupation coverage” but then switch to the least favourable “any occupation coverage” thereafter. With private plans, you have more flexibility to tailor the coverage to your specific needs, including the parameters of how “total disability” is defined.

Another consideration with group LTD Coverage: generally when you leave the group, the coverage ends. For example, if you leave your job to seek out new employment, you may lose your LTD Coverage. On the contrary, private LTD Coverage continues, as it is not tied to your group plan or employment.

A Further consideration to consider is taxation of the benefits. With group plans, if your employer/union contributes towards any or all of your premiums, the benefits will be taxable. Conversely, with private coverage, since all premiums are covered by the insured individual, the benefits aren’t generally taxable.

Proactive LTD Coverage Research

Educating yourself about the LTD Coverage options available and how “total disability” is defined are important considerations in deciding which plan to go with. There are also the practical considerations of whether to purchase LTD Coverage through a group or privately given the pros and cons of each. It is imperative that you be proactive in understanding your coverage so that you are protected in case of a tragedy, when you are most vulnerable.

It is always advisable to speak with a reputable insurance professional to ensure your coverage is right for you.

Written by

Lawson is the founding lawyer of Hennick Law.

He received his Bachelor of Science degree in Biology from York University, and then attended University of Ottawa’s Faculty of Law graduating with a Bachelor of Laws degree in 2009 before being called to the Ontario Bar in 2010.

Lawson articled with a boutique litigation firm where he gained experience in a variety of practice areas including representing Indian Residential School survivors to obtain compensation through the Independent Assessment Process for sexual and physical harms suffered.

Since his call to the bar, Lawson has devoted his legal practice exclusively to the area of personal injury and employment law. He started his firm in 2019 and regularly acts for clients on injury claims including motor vehicle accidents, slip and falls, product liability, dog bite cases and employment law disputes. He regularly appears before the Superior Court of Justice and has also appeared before the Financial Services Commission of Ontario (FSCO) and License Appeal Tribunal.