Are you worried about what would happen if your LTD policy ends? Are you wondering what to do when you recover from the medical condition you are suffering from or after you reach a certain age? Long-term disability benefits are designed to support those who have disabling medical conditions for a lengthy period. What happens when you run out of long-term disability? Granted, a time will come when you will no longer qualify for LTD benefits. However, there are other benefits that you may be able to apply to continue getting the financial support you need.
Typically, LTD policies will cover 60% to 85% of your base salary. However, there is usually a maximum amount and a specified time in which the benefits will be paid. Note that you may have some offsets that reduce the amount you receive as LTD benefits. Some policies will have specific clauses that exclude some sources of income, such as CPP or WSIB payments. This offset amount will be calculated based on any other benefits you may be receiving. Additionally, you may receive higher payments in the following years due to the cost-of-living adjustment made each year as a result of inflation. This adjustment for inflation may cause your LTD benefits to increase by 1% to 3% every year.
Typically, LTD benefits are paid from the date the elimination period is completed. This is a unique waiting period stipulated in your policy. Insurance providers typically give an elimination period ranging from 4 months to 52 weeks.
LTD claims are never based on a diagnosis but rather on the disability that is caused by your medical condition. Every LTD policy will have a specific clause that defines disability. This clause will determine whether the condition you are facing will be considered a long-term disability, as well as how much you are able to collect in LTD benefits. You may have a serious illness but not be considered totally disabled, which could make it difficult to qualify for LTD benefits. To be considered totally disabled, you must have a disability that is preventing you from performing all or at least most of the duties required in your current job.
It’s important to understand when your LTD benefits may stop and start planning in advance. First things first, the duration you will receive benefits varies depending on the type of long-term disability policy you have. Typically, LTD policies will offer financial support for at least two years and so long as you are unable to work and cater for your day-to-day living expenses. Other policies will offer compensation for much longer periods, such as up to 5 years, 10 years or until you reach the age of 65.
Ideally, every policy is different, and the term offered will be clearly highlighted in your policy document. That’s why it’s important to review the documentation of your policy in advance to find out how long you qualify for LTD benefits, whether you are receiving it through your employer or a private insurance provider.
LTD policies are designed to provide the financial assistance needed when one is experiencing a disability that is preventing them from working and earning a living. If you are no longer disabled, you may automatically be disqualified from receiving LTD benefits. In fact, most insurance companies that offer such policies will require you to submit to medical testing on a routine basis. You may also be required to undergo rehabilitation which may speed up the recovery. As soon as the insurance provider determines that you have recovered from the disabling medical condition, you may no longer be offered LTD benefits.
You may be able to receive LTD benefits for as long as you are experiencing a disability that is preventing you from working. If the insurance company believes that you have recovered and can return to work, they may no longer offer you LTD benefits. Some employers may maintain your job while you are under LTD, which enables you to go back as soon as you recover. If your LTD policy ends and your previous employer is no longer willing to give you work, you can still seek employment elsewhere.
Every long-term disability policy is different and may not last for the same amount of time. There are policies that may expire even before you are fully recovered and can return to work. In such a situation, you will need to look for other alternatives to secure financial support. A suitable option could be the Canada Pension Plan (CPP). CPP allows you to continue receiving disability benefits long after your LTD benefits expire. You can apply for CPP in advance when you know your LTD policy is about to expire.
CPP is a monthly taxable benefit designed to replace part of your income for the rest of your life. Should you qualify for CPP, you will receive a retirement pension every month.
To qualify for CPP, you must:
CPP retirement pension isn’t automatically issued. You must apply in order to start receiving the payments. The amount you receive will depend on several factors, such as:
To determine when you collect CPP, review your finances, health, and life expectancy. While you may choose to delay CPP to receive a larger benefit, there is no advantage to taking CPP later than 70 years.
Does long-term disability end at 65? In many cases, LTD benefits will expire when you turn 65. There are, however, policies that will offer lifelong benefits even though they aren’t as common. If you were contributing the minimum amount to CPP, you might still qualify for benefits that can help offset your financial obligations after age 65. These retirement payments can come in after the age of 65. You can apply for CPP as early as age 60 or as late as 70. If you choose to apply for CPP early, the payments will likely be smaller. CPP applications can take up to 120 days to be processed. This is why it’s recommended that you start the application process long before your LTD benefits expire to avoid a long period in which you are not covered.
As lawyers, we educate our clients on what to do when LTD benefits end in Canada. Our team can help you review possible alternatives to ensure you are fully covered long before your LTD benefits cease. Contact us to provide additional answers to your questions on LTD benefits.