Demystifying Disability Insurance Terminology
Do you feel overwhelmed or confused when talking about disability insurance? If so, you are not alone. Discussing disability insurance can feel like a whole other language. In today’s post, we will go over some common terms related to LTD and other disability insurance, to help you get a better grasp on them.
Waiting Period (also called “Elimination Period” or “Qualifying Period”)
This is the period of time between when you become disabled and when the first benefits will be paid. It’s time you have to “wait out” until your benefits begin. There are no retroactive payments for the waiting period.
If an LTD policy covers you for “own occupation”, it means that it will pay you benefits if you are disabled from working in the same job or role you worked at before. Often, LTD policies use the “own occupation” definition for the first two years.
Often (but not always), after two years, your LTD policy will pay you benefits only if you are fully disabled from “any occupation”. That’s in contrast to “own occupation.” In other words, an “any occupation” policy will cover you only if you are unable to do any work that you are suitable for based on your age, training, experience, education, etc.–regardless of whether it is at a somewhat lower-paying job or one that you are not all that interested in.
Change of Definition
LTD insurance uses an occupational test to see what type of of work you are able or unable to do while you’re receiving disability benefits. Above, you’ll see the definitions for “any occupation” and “own occupation.” If and when the policy changes from coverage under one definition to the other, that’s known as a “change of definition.”
IME (Independent Medical Examination)
An IME is a medical exam that’s arranged and paid for by the insurer to obtain a second opinion about your disability. IMEs can have a specific focus such as mental health or functional capacity. (Learn more about IMEs here and here.)
Integration of Benefits (also called “Coordination of Benefits” or “Offsetting of Benefits”)
Integration of Benefits takes place when the insurer factors in income you’re receiving from other programs or benefits (such as CPP Disability, WSIB, etc.) when calculating the benefits they’ll pay you. According to Service Canada, if you have multiple insurance plans, your income while on disability will usually not be higher than 60% to 85% of your regular pay.
Exclusions are circumstances or causes of illness and injury that will exclude your disability from being covered. Examples of exclusions include injuries suffered during a crime, riot, or war; that were self-inflicted; that are related to a known but undeclared pre-existing condition; or that are related to drug or alcohol use.