All LTD insurance policies include language indicating how much the insured will receive in benefits if he or she becomes unable to work due to a medical condition. Normally, this amount will be a percentage of the person’s earnings before they became unable to work. However, most of the time, insurers will also include provisions in their LTD policies that stipulate that other monies received by the insured, as a result of the same or related medical condition, or employment or self-employment income, among others, will reduce the amount of benefits payable pursuant to the LTD policy. This is often the case regarding Canada Pension Plan Disability Benefits (CPP – Disability Benefits).
CPP-Disability benefits are similar to LTD benefits; they are both payable to individuals who, by reason of a medical condition, become unable to work indefinitely or for the long-term. Almost all LTD policies include language that seeks to allow the insurance provider to reduce the amount of benefits payable to the insured by the amount received for CPP-Disability benefits. The amount is sometimes reduced on a dollar-for-dollar basis, meaning each dollar received for CPP-Disability will equally reduce the benefit under the LTD policy, and other times it will be only a percentage of the CPP benefit. For example, if you a have been approved for LTD benefits for $2,000.00 dollars a month, and also for CPP-Disability benefits for $500.00 dollars a month, your LTD benefit will be reduced to $1,500.00, if your policy allows the insurer to reduce 100% of your CPP benefit, as this will provide you with the $2,000.00 dollars a month benefit initially assessed by your LTD coverage.
It is very important to review any section of your LTD policy that deals with this type of offsets, as it may effectively impose an obligation on you to apply for other benefits such as CPP-Disability. Some LTD policies will require you to apply for CPP before becoming eligible for LTD benefits, or may specify that if you fail to apply for CPP, the insurer will nonetheless reduce your benefits by an amount equal to what you may have received through CPP had you applied.
Applications for LTD and CPP benefits can take months before being approved, therefore, it is important to apply as soon as possible for both benefits in order to avoid issues that could arise due to the offset provisions of your LTD policy. Such issues can arise if you begin receiving LTD benefits, and some time later you are approved for CPP-Disability benefits, and receive a lump sum payment, representing the retroactive payment for CPP benefits from the date you were originally eligible. Depending on the language of your LTD policy, such lump sum payments could cause you to owe money to your LTD insurance provider retroactively, and it could affect your LTD benefits going forward.
It can be difficult to assess exactly how and when your insurer may be able to offset money you receive from other sources against your LTD benefits. In order to ensure that you receive the amount of benefits you are entitled to, and obtain advice regarding any benefits’ repayment requested by your insurer, an LTD lawyer can help you understand your rights and obligations under your policy.