Disability insurance Nine questions answered
If you're unable to work owing to an accident or illness, your disability insurance may compensate you for loss of wages. Here are nine questions you should ask yourself about disability insurance.
- What does “disability” mean?
- What is a waiting period?
- Short-term or long-term insurance?
- Group or individual insurance?
- Taxable or non-taxable?
- Who decides whether you are entitled to the money from your insurance?
- Are you entitled to benefits under public disability plans?
- How to reduce the risks of dispute and dissatisfaction
- What to do if you’re not satisfied?
1. What does “disability” mean?
Being disabled means being unable to work or do your usual activities owing to illness or injury.
However, how “disability” is defined depends on the insurance contract. For example, here are two definitions with significantly different consequences for persons living with an illness or injury:
- Being unable to perform all the duties of your regular occupation.
- You are unable to perform the duties of any occupation for which you are, or may reasonably become, qualified by education, training and experience.
To better understand your insurance coverage, talk to your insurer.
2. What is a waiting period?
Your disability insurance contract probably includes a waiting periodThe waiting period is the period during which an insured is not eligible for insurance benefits, even though the covered risk may have occurred. For example, in disability insurance, an insured may be disabled but not receive money from their insurer during the first two weeks of a disability., which means you will need to wait a certain number of days following the start of your disability before you begin receiving any insurance money, known as benefitsA benefit, or insurance benefit, is an amount of money that an insurance company pays a person further to a loss against which they were insured..
The waiting period depends on the contract. To find out the duration and conditions of the waiting period that applies to you, talk to your insurer.
If your employer offers sick leave, you’re usually entitled to take it during the waiting period.
3. Short-term or long-term insurance?
We often talk about short-term insurance and long-term insurance, but what are they exactly?
Short-term disability insurance
- Short-term disability insuranceDisability insurance is insurance that provides benefits to insureds who are unable to work following an illness or accident, generally based on their salary. takes effect before long-term disability insurance.
- You receive a percentage (usually less than 70%) of your regular salary.
- The insurance is valid for a specific period of time, which is usually calculated in weeks.
- If you don't have short-term disability insurance, you may be entitled to government protections such as Employment Insurance (EI) disability benefits.
Long-term disability insurance
- Long-term disability insurance takes effect when your short-term disability or EI benefits end.
- You then receive long-term benefits based, for example, on a percentage of your regular income.
- The benefits are paid for a maximum period determined by your contract. This period is significantly longer. In some cases, for example, benefits may be paid until age 65.
- Some contracts provide for a waiver of premiumsA waiver of premium is the right, for an insured, not to pay their insurance premium., which, in concrete terms, means you don’t have to pay for your insurance for as long as you’re disabled.
4. Group or individual insurance?
There are two types of disability insurance, group and individual.
Group
- Group disability insurance is offered to all members of a specific group, e.g., all employees of a company or all members of a professional association.
- In many cases, you are required to enroll in the plan and you can’t choose your coverage.
Individual
- Individual insurance is purchased by a single individual at a time (e.g., a self-employed worker).
- You can choose the coverage you want.
5. Taxable or non-taxable?
You may have to pay income tax on the money you receive from your insurer.
- If your employer, union or professional association pays a portion of the insurance premiums, you usually have to pay income tax on the money you receive while disabled.
- If, however, you are responsible for paying all the insurance premiums, the money received during your disability period usually is not taxable.
If you’re not sure, talk to your employer or insurer.
What if you have other income?
Example: Martin works as a cabinetmaker at a furniture manufacturing plant. While on vacation, he suffered a serious back injury in a ski accident. Since then, he has been on leave from his job and receiving disability benefits from his insurer.
To take his mind off of things, Martin spends a few hours a week helping a friend with his small business. This earns him some money but nowhere near as much as he earned as a cabinetmaker.
His insurer will probably reduce the benefits it pays Martin. Generally, benefits are adjusted based on the insured person’s total income.
If you are receiving disability benefits, ask your insurer about the consequences of earning extra income.
6. Who decides whether you are entitled to the money from your insurance?
Contrary to what you may think, your physician doesn’t decide whether your disability is covered by your insurance. That decision is made by your insurer on the basis of your situation and contract.
7. Are you entitled to benefits under public disability plans?
Whether you have disability insurance or not, you may be entitled to benefits under the public plans.
- Commission des normes, de l’équité, de la santé et de la sécurité au travail (CNESST)
If your disability is due to an industrial accident, you could receive benefits from the Commission des normes, de l'équité, de la santé et de la sécurité du travail (CNESST) This link will open in a new window. - Société de lʼassurance automobile du Québec (SAAQ)
All Quebeckers are automatically covered for injury or death resulting from a traffic accident. This insurance is valid whether or not you are responsible for the accident. For more information, consult the website of the Société de l’assurance automobile du Québec This link will open in a new window. - Retraite Québec
If you have a serious permanent health issue that is preventing you from engaging in any type of employment, you may be entitled to a disability pension from Retraite Québec. However, you must have already contributed to the Québec Pension Plan (QPP). You can find an estimate of your disability pension on your statement of participation. For more information, refer to Retraite Québec’s website This link will open in a new window.
Your insurer may coordinate benefits with these plans, in which case it will limit the amounts it will pay you based on the benefits you’re already receiving under another plan.
8. How to reduce the risks of dispute and dissatisfaction
Be aware of the limits of disability insuranceDisability insurance is insurance that provides benefits to insureds who are unable to work following an illness or accident, generally based on their salary. so you choose a product suited to your needs. For example, before taking out insuranceUndertake to comply with an insurance contract, particularly by paying premiums in order to benefit from insurance coverage. Commonly referred to as “buying” or “purchasing” insurance., familiarize yourself with the requirements that must be met for the insurer to consider you disabled. If you have disability insurance through a group plan, you don’t choose the insurance. However, if you consider the insurance insufficient, you can always purchase additional disability coverage.
The conditions to be met in order to benefit from the insurance vary from one contract to the next. An insurer may even offer more than one type of disability insurance. While you are considered disabled under some contracts if you are unable to perform your own occupation, under others you must be unable to perform any occupation. The difference is important.
Suppose a forestry worker injures his leg and is no longer able to walk in the woods. He is unable to perform his own occupation. However, he is still fit to work when, for example, performing office duties. Depending on the definition used in the contract, this worker may or may not be considered to be disabled and entitled to benefits.
Some contracts stipulate that you must be unable to perform your own occupation for a certain period of time to benefit from the insurance. After that period ends, you must be unable to perform any gainful occupation to receive benefits.
9. What to do if you’re not satisfied?
If your insurer refuses to pay the amounts you believe you’re entitled to, try to resolve the issue directly with your insurer first.
If you think your insurer is in the wrong and it refuses to correct the situation, you can file a complaint with the AMF by contacting the Information Centre.
A real-life example
A nurse claimed benefits for a five-month period when she was disabled and unable to work. The insurer denied her claim on the grounds that she was fit to perform the essential duties of her regular occupation. The insured disagreed. She tried unsuccessfully to reach an agreement with the insurer that would have enabled her to receive benefits. She requested that the insurer transfer her file to the AMF for review.
Upon reviewing the claim, the AMF considered the insured's condition to be unstable. To relieve her pain, she had to take a lot of prescription drugs. The drugs caused side effects that were incompatible with her job as a nurse, including loss of concentration. After discussions with the insurer, the insurer agreed to compensate the insured and paid her $9,000.
While, in this instance, the AMF settled the case to the satisfaction of the insured, it cannot compel the parties to a dispute to present an offer or accept a settlement. However, you always have the option of taking legal action.
Do you have an issue with an insurer?
To help you settle a dispute, file a complaint This link will open in a new window by following the steps indicated on our website.
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