Financially Surviving Illness or Injury: Exploring Disability Benefits - Part 1 of 3

Work, save, invest your money. Achieve your financial goals, enjoy your hard work.

This is how most people envision their lives progressing but from a financial perspective, this is just one scenario, a "Best Case Scenario". Some take it further and put aside extra money in a slush or emergency fund for unexpected expenses. Fewer still prepare for the possibility of a complete disruption to paid work. "Yeah, but I have disability through work!"

Do you? Does it include short-term disability? How many months must you consecutively be disabled before receiving a benefit? What are your monthly expenses and will your disability benefits cover those expenses after taxes have been removed? How many months can you be covered before required to find alternative work, regardless if that work will cover your expenses or not?

This article is the first of a three part series about Group Disability Benefits that will come out this week starting with:

  1. What are Group Disability Benefits?

  2. What Happens if I get Disabled?

  3. Personal Disability Coverage Options

What are Group Disability Benefits?

Group Benefits are great for salaried employees in that they offer comprehensive benefits at discount prices compared to personal coverage due to the volume of employees included in the plan.

Most plans that do include disability offer long-term coverage while a few may also include short-term disability separate from government Employment Insurance - Sick Leave benefits. Group Short-term disability will cover a percentage off monthly salary typically up to four months before shifting into long-term benefits, which may start after four to six months of consecutive disability. If a plan does not have short-term disability, an employee will have to apply for government EI - Sick Leave which is only available for up to 15 weeks with a maximum of $562 pre-tax per week.

Once long-term disability takes effect there are some specific definitions of work that must be paid attention to. Most plans provide up to 24 months of coverage for "Regular or Own Occupation". Each policy can have a different definition but Own Occupation is generally defined by the Government of Canada as:

"The definition of "regular or own occupation" plan means you'll receive benefits if you're unable to perform the main duties of the job you had at the time the disability started."

After 24 months, the definition changes to "Any Occupation" meaning if you can physically do any occupation, regardless whether its personally satisfying or meets your financial needs, you are required to work as your long-term benefits will end.

There have been no shortage of stories where employees have gone on disability then have had to fight with disability underwriters to get their benefits extended beyond 24 months and prove they are not able to return to work. In the next part of this series I'll talk about what happens when you do go on disability and some examples of monetary benefits you may receive.

Michael Thorpe