TL;DR
- Long-term disability (LTD) payments can be reduced if you receive certain other benefits, depending on your insurance policy’s offset rules.
- CPP Disability (CPPD) and Workers’ Compensation benefits are commonly deducted from LTD payments.
- Termination pay, severance, and other group disability plans may also reduce LTD benefits to prevent “double-dipping.”
- ODSP, Employment Insurance, and individual disability policies are usually not deducted, though they may affect eligibility elsewhere.
- Because policies differ, reviewing your LTD policy with a disability lawyer can help ensure you receive the full benefits you’re entitled to.
Your long term disability (LTD) insurance benefits can be reduced by other benefits that are being paid or are payable to you. Your disability insurance policy contains the reduction of LTD and/or offsets sections that describe how other benefits are treated. Some common deductions are reviewed below.
1. Canada Pension Plan Disability (CPPD) Benefits
The most common deduction is the Canada Pension Plan Disability or CPPD benefits. CPPD benefits are designed to provide partial income replacement to eligible Canada Pension Plan (CPP) contributors who are under age 65 with a severe and prolonged disability.
It is important to know that CPPD benefits that are payable to you might also be deducted. An LTD insurer usually asks you to apply for CPPD benefits. If you fail or refuse to submit an application, the LTD insurer might, at their discretion, estimate the amount of CPPD benefit that is payable to you and start deducting it. It is advisable to apply for CPPD benefits if you suffer from severe and prolonged disability preventing you from working.
2. Ontario Disability Support Program (ODSP) Benefits
The Ontario Disability Support Program or ODSP helps people with disabilities who are in financial need. Such benefits are not subtracted from your LTD benefits. Note, however, that your LTD benefits will likely be treated as income by the Ontario Ministry of Community and Social Services in the context of your ODSP entitlement.
3. Benefits Under the Workers Compensation Act
If you miss time from work because of a work-related injury or illness, you may be entitled to loss-of-earnings and other benefits under the Workers Compensation Act. Such benefits are normally treated as a deduction by your LTD insurer to reduce your LTD benefits.
4. Employment Insurance Benefits
Employment Insurance benefits are not normally deducted from your LTD benefits.
5. Termination Pay and Severance Benefits
Such benefits are normally treated as employment income and are deducted from your LTD benefits.
6. Other Group or Association Insurance Plans
Some workers might have long term disability coverage under multiple group insurance plans. This might happen where one works for multiple companies thus having access to several disability insurance policies. This might also happen when an employer has several disability insurance policies covering their employees. In such cases, no double-dipping is permitted. All group insurance LTD benefits are coordinated between disability insurers.
7. Individual Insurance Policies
Disability insurance payments under the individual insurance policy are usually treated differently: they are not deducted from your LTD benefits under a group insurance policy.
8. Income Replacement Benefits
If you are unable to return to your job due to the injuries you suffered in a car accident, you might be entitled to receive Income Replacement Benefits from your car insurer. Such disability benefits are not deducted from your LTD benefits. However, it is your car insurer that normally deducts your LTD benefits from your Income Replacement Benefits. Again, double-dipping is not allowed.
While the above describes a common treatment that other benefits receive in LTD insurance policies, it is always advisable to review your specific disability policy with a disability lawyer to ensure you are receiving all the benefits you are entitled to. If you think you have been unfairly denied disability, an informed disability lawyer can help.
