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Canada Pension Plan vs. long-term disability benefits

By Nainesh Kotak

There are several types of financial aid that may be available to you if you become disabled due to illness or injury and are unable to work. The two most common types of disability benefits available to Canadians are the Canada Pension Plan (CPP) and long-term disability (LTD) coverage.

For both LTD and CPP applications for disability benefits, a claimant must provide medical evidence from their physician showing proof of their disability, as well as other personal information and evidence of their disability as required by the respective application processes. The CPP program has stricter eligibility requirements than most LTD insurance plans; however, once approved, CPP is less likely to terminate your benefits than your LTD insurance provider.

CPP benefits

Your eligibility for benefits under the CPP requires that you made sufficient contributions to CPP and have worked in four of the six years prior to applying. Also, you must provide evidence that you have a ‘severe’ and ‘prolonged’ disability that prevents you from being regularly able to work. Unlike LTD benefits which are provided by insurance companies, CPP benefits are provided through a federal program available to all Canadians (administered by Service Canada), except residents of Quebec who have access to their own provincial plan, QPP disability benefits.

When your application for CPP has been approved, you will be eligible to receive retroactive payments for up to one year, and monthly payments until you are no longer disabled or to the age of 65. If your CPP application has been denied, you can appeal the decision through Service Canada.

If your medical condition prevents you from working, you can apply for both LTD benefits and CPP benefits (providing that you have LTD insurance coverage). If you are approved for both LTD and CPP, you cannot receive a greater total amount of benefits, since CPP payments are deducted from the LTD benefit paid. However, one key advantage to being approved for CPP is that your LTD coverage provider is less likely to terminate your LTD benefits, claiming that you are able to work when you have already met CPP requirements and CPP has ruled that your disability qualifies you for CPP payments. Also, if your LTD payments are indeed terminated before you are fully able to work, you can at least continue to receive CPP (once approved) while filing a lawsuit or appeal against your insurance company. On the other hand, be aware that LTD benefits are not taxable under some plans and in such a case, a disabled person who is receiving both LTD and CPP payments may have a lower net income because their CPP income is taxed. 

LTD benefits under a disability insurance plan

Long-term disability coverage is intended to provide income replacement if you become ill or injured for an extended period and are unable to work. The amount of income replacement differs with each plan and is generally a percentage of the claimant’s income up to a maximum amount.  

Long-term disability coverage is provided by insurance companies and may be purchased independently or under a group plan. Many people have LTD coverage under their employee group benefits plan and in such a case, the employer may pay the disability insurance premiums or the premiums may be partially or wholly deducted from the employee’s pay.

As noted above, if your disability prevents you from performing effectively at work and you have sought medical attention for your condition, you can apply for disability benefits from your insurance provider. You will be required to submit an application that includes detailed documentation from your doctor or medical team, and shows how your symptoms prevent you from performing specific work tasks.

The two most common points in time when a long-term disability claim may be denied is when a disabled person first applies for LTD benefits and then, after two years when the requirements for disability benefits becomes more stringent. In the first two years, a person is eligible for benefits if the symptoms of their disability prevent them from performing the essential tasks of their own occupation, but after two years, eligibility requires that a person’s disability prevents them from doing any job for which they may be suited, based on their experience, education or training. This means, after having your LTD claim approved and receiving benefits, it is not unusual to have benefits denied after two years because the insurance provider believes your disability doesn’t prevent you from performing any suitable occupation.

Legitimate applications for disability benefits are sometimes rejected, both by LTD insurance plans (for persons who have LTD insurance) and the CPP. If your claim is denied, an experienced and competent disability benefits lawyer offers the best chance of obtaining owed benefits.

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