Long Term Disability Insurance Essay

Illnesses or injuries can leave people unable to work for long periods of time. While they’re unable to work, they still have expenses that need to be paid. Long-term disability insurance can help employees who find themselves in this situation. This insurance pays a percentage of their pre-disability salaries until they get better, retire, or otherwise become ineligible for continued payments.

For employees, this type of insurance is very valuable. Otherwise-healthy people could become disabled at any time, which can put a strain on their finances. By providing long-term disability insurance, employers can give their employees peace of mind and security. They can also retain employees by offering insurance. However, long-term disability contracts can have fine print that can catch both employees and employers off guard. Have you read the fine print in your contract?

All Source Maximum Clauses

This clause accounts for employees’ income from all sources and limits their replacement income to a percentage of their pre-disability income. The all source threshold is commonly 85 percent, according to Benefits Canada.

Employees’ income sources can vary, and they’re all considered when calculating long-term disability benefits. Employees could receive income from CPP disability benefits, workers’ compensation, or auto insurance. They could also receive income from an employer or from self-employment.

The reason for this clause is to avoid disincentivizing employees from returning to work. If employees receive as much or more income from the disability benefit than they did when they were at work, some could decide to not return to work. With this clause, employees need to recover and return to work to keep earning their pre-disability income.

Erosion of Long-Term Disability