Most employees have coverage under a group plan should they become disabled during their working years. As a Certified Financial Planner in Ottawa,Ontario, I make it a point to ask my clients if they understand how their group long term disability coverage works. What I find is that most people think they are sufficiently covered simply because they have a plan. Unfortunately it is not as straight forward as that. Very often, group disability plans have a limited definition of what constitutes a disability, meaning y
ou may find yourself going back to work earlier than anticipated. It isn’t until people need to go on claim that they discover the limitations of their group plan.

Most group long term disability plans offer the following definition of disability: “Own Occupation for 24 months and Any Occupation thereafter.” What does this mean exactly? Well, for the first two years of a disability, you will qualify for benefits as long as you are unable to work in your regular occupation and you are not working elsewhere. If, after two years, you are able to earn income at any job, you will be taken off claim.

Compare that to individual disability insurance plans which are a little more liberal in their definition. Essentially they will pay a claim as long as you are not working in your regular occupation and they will not take you off claim if you decide to work in an unrelated occupation during the “Own Occupation” period. In addition to that, as the owner of your own personal insurance plan, you are able to choose the length of the Own Occupation period at the time of application. The most common options available are two years, five years or to age 65. Of course the longer periods will cost more premium dollars but will allow you to stay on claim longer even if you choose to work at another occupation.

Although longer “Own Occupation” periods are available for group long term disability plans, generally employers will choose a shorter period of either 12 or 24 months in order to keep costs low.  Keep in mind that the employer has a responsibility to their employees to relieve the financial burden of a disability when the employee is truly unable to work but does not have an obligation to support them if they are able to work but choose not to do so. Shorter own occupation periods provide better incentive for employees to rehabilitate and get back to work earlier.

If you have not familiarized yourself with the definition of disability in your group contract, I suggest that you do so and then consult with an Insurance Broker or Financial Advisor on how to complement your group plan with a personal disability insurance plan. Individual plans can be customized to begin paying after your group plan benefits have stopped and they can also top up a group plan which may have a lower maximum benefit than what you qualify for given your income level. But that is a discussion for another day. J

Lisa Mikhael, CFP, RHU

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