Disability insurance (short-term and long-term) is designed to provide one with income replacement or supplement in the event one becomes disabled due to an injury, illness, or accident and cannot work. Typical disability insurance policies provide for monthly benefits of 60-85% of one's regular monthly earnings.

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Disability insurance is governed by the insurance policy, the Insurance Act, RSBC 2012, c 1, and common law principles.

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There are a variety of sources of disability income, LTD is one of them. Others include:

- employer sick pay,

- Employment Insurance sickness benefits,

- short-term disability insurance ("STD"),

- Canada Pension Plan disability pension ("CPPd"),

- Disability Tax Credit,

- Workers Compensation, and

- BC Disability Assistance.

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Disability Insurance - Peace of Mind Contract

Disability insurance is a "peace of mind" contract. This means that disability insurance is meant to provide the insured with: (1) income replacement during a period of disability when they cannot work; and (2) the reassurance of financial security during such a period. The Supreme Court of Canada in Fidler v. Sun Life Assurance Co. of Canada, [2006] S.C.J. No. 30 at paras. 39 and 57 ("Fidler"), described disability insurance as "where the very object of [the]insurance contract is to provide… peace of mind…" and commented that "the intangible benefit provided by such a contract is the prospect of continued financial security when a person's disability makes working, and therefore receiving an income, no longer possible."

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Two Types of Disability Policies

There are two broad categories of disability insurance policies: group policies and individual policies. Individual policies are characterized by a one-to-one relationship between the insured and insurer. Group policies are a single insurance policy issued to a group or association (e.g., employer or union) to which all eligible members of that group may be insured under the policy. The employer may pay some or all of the premiums on behalf of the individual insureds. Employees become plan members, but do not have direct privity of contract.

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Eligibility for LTD Benefits: "Totally Disabled"?

The standard required in disability policies to be eligible for benefits is "totally disabled". Each insurance policy will have its own slightly different definition but, generally, it means that the insured person is unable to perform the essential duties or majority of their job due to an injury or illness.

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While the insurance policy generally governs the test for total disability, BC and Canadian courts have also weighed in on what "totally disabled" means:

An insured is considered to be totally disabled from performing her own occupation where she is unable to perform 'substantially all of the duties of that position.' Total disability does not mean absolute physical disability, but rather that the insured's injuries are such that common care and prudent require her to desist from her occupation in order to effectuate a cure: Paul Revere Life Insurance v. Sucharov, 1983 CanLII 168 (S.C.C.), [1983] 2 S.C.R. 541, at para. 546.

You may also be considered “totally disabled” if:

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1. You cannot work your regular job in the short-term.
2. You cannot work your regular job in the long-term.
3. You can currently work PART-TIME at your own job.
4. You can currently work PART-TIME at another job.
5. You can perform SOME tasks of a job, but not all.
6. Ceasing to work can improve your quality of life or prolong your life.

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Most disability policies have two different time periods during which the definition of "totally disabled" is applied differently:

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1. the "own occupation" period that refers to the insured's pre-disability job and that typically runs for the first 2 years of disability; and
2. the "any occupation" period that broadens the definition to include any occupation for which the insured is suitable by education, training, and skill.

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Disability Insurance Information

Continue learning about submitting a Long Term Disability Claim and claim denials, wrongful dismissals and cutting off benefits, disputing claims and overview of the legal process in our related Disability Articles:

1. Applying for Long Term Disability and Denied Claims
2. Calculating Damages in a Wrongful Dismissal With a Disability Benefit Claim
3. Disputing Denied Disability Claims, Remedies and Overview of Legal Process

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Our experienced Employment & Disability Group is ready to review your claim in a free consultation, and provide you with invaluable information and assistance. Get in touch today.