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Personal Injury

Consumers' guide to long-term disability insurance

In part one of a four-part series on long-term disability insurance, Toronto personal injury lawyer Brian Goldfinger discusses the basic facts around coverage and benefits.

Long-term disability (LTD) insurance is designed to financially help those who suffer an injury or disability that prevents them from working, but Toronto plaintiff personal injury lawyer Brian Goldfinger says many people aren't clear what their policies can — and can't — do for them

Employees often receive LTD coverage through their employer as part of their workplace benefits, but the insurance can also be purchased by individuals, he tells

LTD policies cover workers too injured to work at their own occupation over a lengthy period of time, usually up to two years, depending on the policy, by providing a percentage of their income, says Goldfinger, founder of Goldfinger Injury Lawyers. At the two year mark, the definition of disability generally changes to any occupation, which is a difficult test to meet.

Depending on the plan, the insurance takes effect once the benefits of a short-term disability (STD) policy run out, in three to six months, he says.

Goldfinger explains that if the policyholder pays the premiums, the payments are not taxed, but if the employer covers the premiums, payouts are taxable.

"It's an expensive product," he says. "Because the insurance company doesn't know how long they will have to keep you on the claim — it could potentially be up to the age of 65."

Regardless, the return on the investment could be worth it, Goldfinger says, noting that non-taxable plans will pay anywhere from 55 to 80 per cent of the policyholder’s workplace income.

"If things go wrong, it'll be there to pick you up, at least to help you make ends meet," he says. "If you're not able to work, how are you making an income? There's only so long you can live off your savings."

At the two-year mark on LTD benefits, the insurance company typically triggers a review of the claim through an “any occupation rider” to determine if the policyholder can work at any job, Goldfinger says. If the person is deemed to be able to perform work at an easier job, the benefits will be cut off.

"But you can also buy policies that don't trigger at that point," he says. People can purchase an "own occupation rider," where a review won’t necessarily be triggered because the policyholder can’t perform their pre-disability job, enabling them to continue collecting benefits, Goldfinger says.

He says step one is understanding what type of coverage you have — STD, LTD or both — in the event an accident or illness renders you unable to work.

"People often think they have the benefits, but they may not work the way they expect them to," he says. "Everyone has a vague idea but often, when they meet with me, I have to give them some bad news, and it turns their world upside down."

Goldfinger says he’s seeing a disturbing trend in new policies that include shorter benefit periods, so instead of coverage that continues until the member turns 65, for example, the benefits are cut off five years from the date of the disability.

"I've seen many unions negotiate contracts and one of the concessions they make is on the LTD policy," he says. "It's a huge hit for a 40-year-old who expected to get benefits for 25 years.”

Because there’s no standard policy across the board, people should review their policies in detail with a broker and ask specific questions about how it works, what the policyholder is entitled to, the length of the benefit period, the monthly amount of the benefits, and whether they are taxable, Goldfinger says.

“They also need to understand how the insurer defines disability, what, if anything changes after the two-year mark on benefits, the exclusions, riders and whether a portion of premiums are returned if no claim is made over a set number of years,” he says.

Some policies only pay out at 55 per cent and Goldfinger says they’re often sold to workers at job sites that don't have Workplace Safety & Insurance Board coverage, he says.

"They're seen as independent contractors" and are obliged to get LTD coverage as a condition of their contract,” Goldfinger says. "They have all these exclusions — for your back, neck, soft-tissue injuries, or depression and anxiety. The only way you get paid is if you lose a limb."

As a personal injury lawyer, he is often retained by clients after they have been denied benefits. "Generally, we get involved when an insurance company has made a decision to deny the claim," Goldfinger says. "Usually, people have two years from the date of the denial to sue."

He says it’s prudent for those whose claims have been denied to seek legal advice as insurance companies’ appeal processes are internal with no third-party oversight.

"We're taking it out of the insurance company's hands and bringing it to an objective forum in the court," Goldfinger says.

Stay tuned for part two where Goldfinger will highlight the steps policyholders must take to successfully challenge an insurance company’s denial of their LTD claim.

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