The answer to this question lies in the wording of your Long-Term Disability (LTD) policy.
Unfortunately, most LTD policies will have clauses in them that allow the insurance provider to reduce their payments to you by the amount of money you receive by the Canadian Pension Plan – Disability (CPP-D). Further, some LTD policies also have clauses that will force you to apply to CPP-D. It is critical to examine your LTD policy and see if and how these conditions apply to your particular policy. If you are having issues deciphering a complex LTD policy, it is always recommended that you speak with a disability lawyer. For information on winning an LTD claim, click here.
What is the difference between LTD and CPP-D?
Understanding that there is a high possibility that your LTD insurer could take or deduct your CPP-D benefits is important. However, it is also important to understand the difference between a private LTD insurer and the public CPP-D.
Your private LTD insurance will typically be contracted by your employer, and both you and the employer will pay monthly premiums to the insurer for the LTD insurance they will provide. The public CPP-D program is connected to Canada’s national pension program and it requires all employed Canadians to make contributions. You will be entitled to CPP-D as long as you have made the required amount of contributions and your disability has been severe and prolonged. To learn more about the difference between private LTD insurers and the public CPP-D click here.
How much of my benefit can the disability insurer deduct?
The question that commonly follows “can my LTD insurer take my CPP-D benefits” is “how much can they take”. Again, to answer this question you must look to your own LTD policy. In most cases, the amount “taken” will be a deduction of your LTD benefits equal to the amount of CPP-D benefits you are now entitled to. Another thing to be conscious of is that if you receive a lump sum retroactive payment from the CPP-D, your LTD may be entitled to some of that money.
What if I refuse to apply for CPP-D?
When there is an LTD policy that requires you to apply for CPP-D benefits a common response is, “what if I just don’t apply”. As discussed above, when you are approved for CPP-D benefits the LTD insurer will commonly reduce the benefits they pay to you by the amount you gain from CPP-D. If you ignore the LTD policy and don’t apply, often the insurer will just treat you like as if you did apply (and were accepted). Meaning they will estimate how much money you would have received in benefits from the CPP-D (had you applied) and deduct that from the benefits they are paying you.
It is usually recommended to apply to CPP-D regardless of your LTD policy. There are multiple reasons that an LTD insurer can cancel their benefit payments to you.
Need help calculating your Long Term Disability Benefit?
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.