Most Long-Term Disability insurance policies contain clauses that would force a would-be beneficiary of Canada Pension Plan Disability Benefits into applying for the benefit. Why? The insurance company will often be permitted to deduct 100% of the benefit from the amount otherwise payable to a disabled person. An example of this type of clause would look like the following:
1) Reductions from benefits
- a) The benefit payable to the beneficiary will be reduced by the full amount of:
- Any Canadian pension plan – disability or a similar plan in another county if the benefits became initially payable on or after the date of total disability.
This clause essentially means, upon your successful application to CPP-D benefits the LTD provider would then reduce the benefits they pay to you by the amount you gain from the CPP-D.
For more information on LTD and CPP-D click here.
Policies like this would leave you with no extra benefits while the LTD would get to pay less - which is to the insurance company's benefit because they retain more money for higher profits. The question naturally arises, “what if I refuse to apply for the CPP-D benefits because only the insurance company will benefit?”.
Can LTD insurers force me to apply for CPP-D?
Technically an LTD insurer cannot force you to apply for CPP-D benefits. However, this does not mean that it would be advisable to skip the application simply to spite the LTD insurer.
Most LTD policies include a clause stating that if a beneficiary does not apply to CPP-D within a certain amount of time the LTD insurer can treat that beneficiary as if they had applied to CPP-D and won the benefit. Yes- that means that the insurance company can deem that you have won CPP-D benefits even if you would have had your application denied! The result of a disabled person in this circumstance is financially devastating because their monthly benefits would be drastically reduced when it should not have been. That is why it is advised to follow the instructions from your LTD provider and apply to CPP-D benefits.
Need help from a Disability Lawyer?
Jeff Mitchell and the team at NOVA Injury Law are very familiar with long term disability policies and how the terms and definitions will impact your right and access to benefits. It is very important to know how your LTD policy works before submitting an application for benefits, and especially before appealing a denial decision.