This post explores the key differences between short term and long term disability benefits. Short term disability benefits usually cover the first weeks or months after you leave work due to disability. Long term disability benefits are only payable after you have been continuously unable to work throughout an elimination period of several months.

Short Term Disability Claims

Short term disability provides income replacement for illnesses and injuries which prevent you from working for a brief period. For instance, an illness such as pneumonia, complications due to pregnancy or recovery from minor surgery might result in a short term disability claim.

Short term disability benefits will also allow you to receive disability benefits in the initial period of an illness where the recovery period is unknown. These benefits are also payable during the waiting period for long term disability where it is clear that severe illness will cause an extended period of work absence.

Types of Short Term Disability Insurance

It is important to review your group insurance coverage to determine if you have short term disability insurance and, if so, what type of coverage you have. Some employers do not provide short term disability coverage and there are different forms that the coverage can take.

Salary Continuance

Some employers will provide salary continuance for on a short term basis after you leave work due to illness. Salary continuance will occur for a limited period and an insurance company may be responsible for assessing your claim for benefits. If your salary continues to be paid by your employer even though you had to submit medical evidence to an insurance company, your benefits are likely paid under a salary continuation program. The employer pays you a portion of your income for a period of a number of weeks. Often your disability income will reduce as your absence persists.

Short Term Disability Coverage

Alternatively, you may have short term disability benefits through an insurance policy. If this is the case, your disability benefits will be paid by an insurance company during the short term disability benefit period. If you have paid all of the premiums for your disability benefits, your short term disability benefits will not be considered taxable income. If your employer has paid any portion of the premiums, you will pay income tax on your sickness benefits.

Employment Insurance Sickness Benefits

Many employers purchase an insurance policy which provides long term disability benefits after the waiting period, but do not have short term disability insurance. If you do not have short term disability benefits, you will need to apply for employment insurance benefits (EI benefits) through the Government of Canada. EI benefits run for up to 26 weeks of income replacement, providing up to 55% of your earnings up to a maximum of $668/week.

Long Term Disability Claims

Long term disability insurance policies provide a crucial safety net if you are unable to work because your disability persists. Depending on the benefits package purchased by your employer, the long term disability benefits may provide benefit payments for a certain period such as two or five years or they may be payable for a longer period including up to your regular retirement age. The insurance policy will set out the disability income payable, the benefit period and the definition of disability.

The Long Term Disability Application

When your short term disability benefits end, you will usually be advised to apply for long term disability benefits. If your employer does not offer paid sick leave and you have been receiving EI sickness benefits, you will need to apply for long term disability benefits at the end of the waiting period set out in your long term disability insurance policy.

You should ask your employer for the long term disability application claim form. You will need to submit medical evidence which supports your inability to work due to illness or injury.

How Much Will You Receive?

Depending on the insurance policy your employer has negotiated, your disability income benefit may provide for anywhere between 50% and 70% of your pre-disability income. Some policies may provide benefits at a lower level. In addition, you may have been offered the opportunity to purchase additional coverage so that your long term disability coverage provides greater income replacement. If you have purchased additional disability coverage, you will have paid additional premiums for the benefit.

Is Long Term Disability Income Taxable?

If you have paid 100% of the disability premium, your benefits are not reportable for income tax purposes. However, if the employer pays any of the premiums, income taxes are payable on the benefits.

What Is the Definition of Disability?

Many long term disability policies provide coverage if you are unable to do the essential duties of your regular job for a certain period (usually up to two years). This period is referred to as the own occupation period. After the end of the own occupation benefit period, the policy often changes to a more difficult to satisfy “any occupation” definition of disability.

What Kinds of Disability Are Covered?

Disability insurance is intended to replace your income when you are unable to work due to illness or injury. Illnesses such as chronic pain, mental health symptoms, fibromyalgia and chronic fatigue are examples of payable claims. Illnesses which may appear to be of short duration such as pneumonia, whiplash or soft tissue injuries following a car accident will entitle you to receive benefits if your illness extends beyond the elimination period.

Be Aware of the Eligibility Requirements

When you become ill, you may believe that you will not be off work throughout the elimination period and will not need to apply for long term disability. It is important to understand that while you may believe you will be off work for a short period, you need to make an application for benefits by a specific date to protect yourself from the financial hardship you will suffer if you do not submit your application in time and satisfy the eligibility requirements.

More Questions?

For a free initial consultation with a disability lawyer, please text 613-777-0992 or call us at 613-233-6898 to schedule a meeting with one of our lawyers.  We will provide a free consultation, in French or English, to ensure that your rights are protected.   In most cases, we can offer to represent you on a contingency fee basis.  This means that you do not pay legal fees unless you win or achieve a settlement on your case.

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