Group Disability Income

• provides income while life insured is unable to work due to illness or accident
• two types:
  1. Short Term Disability
  2. Long Term Disability
• definition of disability
  • very different from the definition for individual disability income
  • benefit provided if meet "own occupation" definition of total disability, but this definition is like the "regular occupation" for individual DI for Long Term Disability
• while benefits are paid, the insurer assesses the disability on an ongoing basis looking at
  • opportunities for retraining based on education and experience
  • medical condition
  • goal is to return the life insured to the pre-disability level of earnings

Short Term Disability (STD)

• also called "weekly income benefit"
• accident: benefits begin on the first day
• sickness: benefits begin on the 8^th day
• benefit period: up to 2 years
• benefit: 60% or 66 2/3% of predisability income
  • taxable since the employer pays at least 50% of the premium
  • tax-free in proportion of the premium paid by the employee

Long Term Disability (LTD)

• benefits start after Short Term Disability ends
• benefit period: 2 years, 5 years, to age 65
• definition of disability
  • unable to work at own occupation during initial two years
  • unable to work at any occupation for which qualified thereafter
• benefit
  • employer-paid: 60% of predisability income
  • employee-paid: 75% of predisability income
• premiums: the better if the employee pays
  • benefits are then tax-free
  • less-expensive than individual coverage

Coordination of Benefits

• limits the maximum allowable replacement income so that an incentive remains to return to work
• sources of disability income:
  • private disability plans (group or individual)
  • government disability plans
  • other earnings (excluding investment earnings)
• the benefits reduce when the maximum is reached

Exclusions

Benefits are not paid if

• not under a doctor's care
• absent due to normal pregnancy or parental leave
• in jail
• self-inflicted injuries
• suicide attempt (sane or insane)
• resulting from war
• while committing a criminal act

While receiving partial disability or rehabilitation benefits, benefits are denied if

• the employee works elsewhere without permission of the insurer
• the employee refuses to participate in an approved partial disability or rehabilitation program as the insurer requires

Pre-Existing Conditions

• total disability during the first 12 months of coverage when the insured received
  • medical treatment within 90 days of the start of coverage for the cause of the disability, or
  • prescription drugs for the cause of disability within 90 days of coverage

Links

• Remember Nortel? Are your disability benefits at risk? (Toronto Star, Nov 2011): Nortel self-insured the benefits, which meant they ended with the bankruptcy