Disability insurance is arguably one of the most important types of insurance an individual can hold. Disability insurance acts as an income replacement for individuals who are sick, injured, or have incurred another type of disability that has rendered them unable to work.
For most, disability insurance is provided through their employer. However, employers are not required to provide disability insurance, so in some cases, it might be necessary to independently obtain disability insurance through an insurance company. Therefore, before deciding to independently obtain disability insurance, it is important to determine whether you are already covered through your employer’s plan.
There are two main types of disability insurance. The first type of disability insurance is referred to as short-term disability (“STD”) and the second is referred to as long-term disability (“LTD”). For the purposes of STD and LTD, the definition of what constitutes a disability can vary between insurance companies, and can even vary between different policies offered by the same company. Further, additional factors that are dictated by insurance companies that can affect STD and LTD coverage include the length of time that an individual can receive benefits, the percentage of income that will be replaced, and any issues that would result in exclusion from coverage.
While LTD and STD serve similar purposes in that they are both income replacements for individuals who are sick or injured and are unable to work, there are some important differences to consider.
Short-Term Disability Insurance
When an individual needs to take time off after falling sick or incurring an injury, they can first do so by using their sick leave. However, the sick leave period offered by employers is usually not long enough to allow an individual to recover from serious illnesses or injuries. Therefore, in situations where more time to recover is needed, it is necessary to seek STD. Further, the point at which sick leave ends is the point at which STD coverage begins. Generally, STD coverage provides benefits for up to 6 months. STD benefits usually replace up to 100% of an employee’s income, but the exact percentage of income replacement is determined by the insurance policy in place.
If an individual is sick or injured and is unable to work as a result, but does not have STD coverage through their employer nor have they obtained it independently, then they may be eligible for Employment Insurance (EI) sickness benefits. To qualify for EI sickness benefits, an individual must have used up all of their available sick leave and must have worked enough hours.
It is important to note that there may be a waiting period before STD coverage kicks in. The waiting period for STD benefits is relatively short. In fact, STD benefits are usually paid out in a matter of days but can take up to 2 weeks.
Long-Term Disability Insurance
Generally, LTD coverage kicks in when short-term disability coverage ends. Who qualifies for the benefit depends on the definitions in the policy. In certain policies, for instance, an individual is eligible for LTD benefits for up to two years if they are unable to return to work at the job they had prior to their regular occupation. In such a case, an individual’s eligibility is contingent on being unable to perform the main duties of the job that was held at the time the disability commenced.
Eligibility for LTD can extend past the two-year mark. At the two-year mark, a new test applies to the person. For instance, in certain policies, the person may qualify if the individual is unable to work at any occupation. This means that when an injury or sickness prevents an individual from performing the duties of any job for which they are reasonably suited, then they are eligible to obtain LTD benefits until the age of 65. Further, most LTD benefits will amount to 60% to 70% of an individual’s normal income. Again, like with STD benefits, the exact amount of income that will be replaced is dependent on the specific insurance policy in place.
Finally, the waiting period for LTD is longer than that of STD. While the length of the waiting period varies, LTD benefits are usually paid out after a few weeks but can take up to a few months.
Filing a Claim for Short-Term and Long-Term Disability
Ultimately, filing a claim for STD and LTD benefits can be a complicated and arduous process. Lawyers can help with streamlining the process, navigating complex policies, and can help to alleviate the stress that comes with filing a claim during what is likely a difficult time