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LTD and 7 Questions to Ask Your Employer

LTD, (Long Term Disability) is a feature found in most group insurance plans. The design of the plan can vary greatly, not only from company to company, but also in what your employer actually chooses for you.  You might have a decent plan, but you may also have a scaled down plan. The time to review what you have is not at the time of your claim.

Here is a list of questions to ask your employer or administrator:

1.  Is the LTD benefit taxable as income or tax free at claim time? This will make a world of difference when you are sick or hurt. If your employer is paying even $1.00 toward the cost of the LTD for you, the entire benefit becomes taxable at claim time.

2.  Is there an upper limit on the monthly benefit? Often we find group plans will cover 66.67% of your salary, however we also see an overall limit can restrict this benefit. For example, if the plan limit is $3,500 per month and you make over $63,000 per year, then as a percentage your benefit is reduced. Find out exactly what you would receive.

3.  If you are a business owner, will the group insurance cover all forms of income? Owners often pay themselves dividends rather than salary. Splitting income with spouses is also a tax strategy. Many group LTD plans only consider your personal T4 as covered income.

4. What exclusions are not covered if I become disabled? Typically, self-inflicted illnesses and acts of war are not covered; criminal acts are not covered either. This means if you do something like become injured and charged with driving under the influence, your claim will not be paid.

5. What is the definition of disability, and does it change over time? Some plans cover your occupation to your age 65. Others cover your occupation for 2 years only and then change to anything based on your income, occupation and experience. And finally others are restricted to “any occupation” from day 1. You don’t want to be a highly paid person who is not approved because you can be a janitor or flip burgers.

6. What happens if you are never “totally” disabled but you suffer a “partial” disability, will a claim be paid? Some plans have a “qualification period” that means partial disabilities are only paid if they are preceded by a “total” disability. If no total disability happens, a partial claim will be rejected. Other plans will pay either or.

7. If you change jobs and leave your current employer, can you take the coverage with you? Most often the answer is no.

Understanding your coverage is an important part of understanding your financial plan.

Finding out what you don’t have is also important. Making the time to correct or update items can be invaluable.  

If you are in Nova Scotia and would like some insurance advice, please contact Corry Collins:
corry@maritimewealth.com
902-444-7000

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