Getting injured or suffering an illness is a part of life we all have to endure. As are medical conditions that are serious enough that we have to miss work beyond a sick day or two. That’s why there are programs that offer both short-term and long-term disability coverage when they happen.
As is clear from the names, the main difference between short-term and long-term disability is the amount of time you’re covered for when an affliction forces you to stay home or in a medical facility. Keep reading to learn more about the fundamentals and differences between short- and long-term disability plans.
If you need to make a claim for short- or long-term disability benefits, however, it’s best to know your rights, the viability of your claim and what you can expect during the process by consulting a lawyer at a disability and employment law firm before submitting your application – ideally before you begin filling it out. As you will also learn below, receiving benefits from a short- or long-term disability insurance plan can be complicated.
Disclaimer: The information in this guide and everywhere else on this website is for general information only and is not intended to provide legal advice of any kind. No lawyer-client relationship is created by accessing or otherwise using Ertl Lawyers’ website or by communicating with a lawyer or staff member. If you need legal advice, contact one of the leading LTD lawyers in Toronto at Ertl Lawyers. We’re more than happy to speak with you.
Short-Term & Long-Term Disability Insurance – The Basics
Both long-term and short-term disability policies are also referred to as income replacement benefits as they are intended to cover a percentage of a worker’s regular earnings they would otherwise lose because they are unable to work due to a disability.
An illness or injury does not have to be work-related for it to be covered under the plan. For work-related accidents, diseases and disorders, most non-federal employers are required to carry their province’s worker’s compensation insurance. Federally-regulated employers must participate in the Federal Workers’ Compensation Service (FWCS.)
Both short-term disability (STD) and long-term disability (LTD) plans are commonly purchased as a group benefits package through the workplace or a professional association. Long-term disability plans can also be purchased by contract and self-employed workers and full-time employees who do not receive benefits or as a supplement to their employer-offered coverage.
The first difference between short-term disability and long-term disability plans is that Canadian employees do not currently have the option of purchasing an STD policy.
If your employer does not supply a short-term disability plan and you run out of sick leave in Ontario and are still unable to work, you can apply for the Government of Canada’s Employment Insurance (EI) Sickness Benefits. You may be eligible to receive up to 15 weeks of financial assistance at 55% of your earnings, up to a maximum of $638 a week.
You can also apply for EI Sickness Benefits before your STD benefits kick in if your work offers short-term disability coverage, but you must repay these benefits if you are later approved for and receive STD benefits. You can also apply for EI Sickness Benefits if you are within their qualification period and your STD benefits have expired without having to pay them back.
Before looking at the other differences between short- and long-term disability coverages, however, it’s helpful to know a little more about the logistics of how these insurance coverages work.
Qualifying and Applying for STD and LTD Benefits
Because of the word “disability,” many Canadians assume that in order to receive STD or LTD benefits, a person must be completely disabled.
While every policy has different wording, to qualify for either long-term or short-term disability benefits, an employee must suffer from a physical, psychological, cognitive or emotional condition that is both debilitating to the point that they are unable to substantively perform their work (known as ‘own occupation’) and that is specifically covered under the policy.
This threshold usually changes over time in an LTD policy (more on this below.) You do not have to lose your mobility or a limb or become completely bed-ridden to qualify for these programs.
Applying for both short- and long-term disability benefits generally requires a three-part application. The first section usually instructs the employee to fill out their personal information, including their medical history, job description and an explanation of their disability.
The second is typically known as a “Physician’s Statement,” where the employee’s doctor details the patient’s disability, symptoms and limitations by way of medical records, charts, tests, imaging and any other medical evidence. A physician’s statement will also generally require an official diagnosis, prognosis and treatment plan.
A third section is usually filled out by the employer and will typically ask the employer to describe the employee’s job function, responsibilities and tasks required to accomplish their work. The employer will often forward this section directly to the insurance company with employer-provided plans.
Short-Term Disability, Long-Term Disability and Taxes
For the most part, if you pay for STD and/or LTD benefits yourself, either directly or through your workplace (e.g., through payroll deductions) or association, the premiums are tax-deductible, and the benefits you receive are not taxed. If, however, your employer or association pays the premium on an LTD or STD plan, the benefits you receive are taxable.
The Differences Between Short-Term and Long-Term Disability
Aside from the length of coverage, there are considerable differences between short-term and long-term disability coverages. Below are the most significant of those differences.
The Waiting Period
Both long-term and short-term disability plans may have a waiting period which may also be referred to as a qualifying or elimination period during which you will not receive benefits.
The waiting period for STD benefits will be considerably shorter and can be anywhere from 0 to 14 days. An LTD qualification period is usually between 90 and 180 days. Short-term disability claims are also processed much faster than LTD claims, which insurance companies can take months to handle.
If your workplace offers both STD and LTD benefits, you can’t collect both at the same time and must wait until your STD benefits are about to expire before applying for LTD benefits. You can apply for Canada Pension Plan (CPP) Disability Benefits if you are suffering from a long-term disability and are waiting for an LTD claim decision or have been denied LTD benefits.
Unlike STD benefits and EI Sickness Benefits, you do not have to pay back CPP disability benefits, but the amount you receive from your LTD policy may be reduced by the amount you receive in CPP benefits. Some LTD policies actually require the insured to apply for CPP disability benefits. It is important to note that the qualifying requirements to be approved for CPP disability benefits are much more difficult compared to those required by an LTD policy. Being denied CPP disability benefits does not automatically prevent you from being approved for LTD benefits.
LTD and STD Benefit Amounts and Periods
The amount of benefits received depends on each individual policy. Some STD plans offer a higher percentage (up to 100%), but for the most part, both long- and short-term disability plans generally offer a percentage of an employee’s pre-disability compensation (anywhere from 50-75%.)
Short-term disability benefits usually only cover an employee’s earnings, while long-term disability benefits will often include medical expenses such as rehab, equipment and other costs not covered by a provincial plan (i.e., OHIP.)
LTD benefits are also generally paid monthly, whereas STD benefits will typically be paid weekly or bi-weekly.
Similar to coverage amounts, the benefit period is specific to each individual policy. Short-term disability plans tend to last to a maximum of 15 weeks to 6 months. LTD benefits will continue until you are able to return to work or retire. There are LTD policies, however, that terminate after a fixed period of 5, 10, or 15 years or longer.
Change in Eligibility/Definition of “Disability” Under a Long-Term Disability Plan
Another difference between STD and LTD plans is that, after a certain amount of time, the criteria for eligibility for LTD benefits changes.
Typically after two years of receiving LTD benefits, you will not qualify for those benefits as the threshold for eligibility is no longer an inability to substantially complete the tasks of your “own occupation,” but that you are unable to work at “any occupation” for which you may be suitable for with proper training.
Insurance companies often send the insured to their own examiner to receive an “independent medical examination” around this time. The report typically will claim that the insured is able to work at “any occupation” and use this assessment as justification to stop paying LTD benefits. This does not happen on an STD plan.
What to do If Your Application for STD or LTD Benefits is Denied
While the information above sounds fairly straightforward, as does the information in the insurance company’s literature and on their website, actually receiving short-term or long-term benefits is anything but.
Insurance companies routinely deny claims for disability benefits. If this happens to you, read our post on what to do if your LTD claim gets denied. The main points to remember are to not get discouraged and give up your claim, and to speak to a disability lawyer right away if you haven’t already.
Even if you provide your insurance company with all the documentation and information they ask for, your claim can be denied. This is especially true with chronic medical conditions and mental health disability claims. A long-term disability lawyer knows how to get insurance companies to honour their policies. If your claim for LTD or STD benefits is denied, contact us to schedule a no-pressure, free consultation as quickly as possible, as your options to receive the compensation you deserve are time-sensitive.