October 29, 2014
If you become disabled and cannot work, do you have enough long-term disability (LTD) insurance to replace your income?
If you are 35 years old today, research shows there is a 50% chance you will become disabled and unable to work for three months or more by the time you’re 65. That’s why having adequate LTD insurance during your working years is as important as insuring your life or your home.
Many employers offer LTD as part of their employee benefits package. Associations or industry groups may also offer group coverage to members. Generally, premiums for group LTD are paid for by employees, so any benefits can be received tax-free.
Benefit coverage for group LTD is usually a percentage of pre-tax earnings up to a maximum, e.g., two-thirds of salary up to $5,000 per month. There also may be a graded schedule of benefits, such as 67% of the first $2,500 of monthly pre-disability earnings; 50% of the next $2,500; and 40% of monthly earnings beyond that.
Any other benefits collected from sources listed in the policy, such as CPP/QPP disability benefits, workers’ compensation and automobile insurance, will be deducted from group LTD benefits.
The typical payment period for group LTD benefits is two years if you can’t work at your own occupation and an additional two years if you can’t work at any occupation at all. In some cases, “any occupation” coverage may continue for several more years or even up to age 65.