Short-Term Disability Insurance in Canada: Role, Limits and Benefits

What would you do if you could no longer do your job due to health issues? Fortunately, many employers offer short-term disability insurance. It’s possible to take out such insurance on an individual basis too. The federal government provides Employment Insurance (EI) sickness benefits as well.

What happens if you can’t work?

When you can’t work, you can’t earn a paycheque. Unless you have a lot of savings, you’ll have a hard time covering your expenses. The bills don’t stop when you do. Not having an income will add stress if you have to pay a mortgage or rent,  have loan payments, or need to buy groceries.  Without an emergency plan in place, a short term disability could cause serious financial anxiety and even trauma – like bankruptcy.

Short-term disability is an insurance plan designed to protect your income if you cannot work for health reasons, usually resulting from an illness or injury.

If you have employer benefits

Short-term disability insurance benefits will vary from employer to employer. For example, some plans offer benefits for only 17 weeks, while others provide benefits for up to a year. These plans typically pay 60-85% of your income while you cannot work. 

If you don’t have it

Many workers don’t have any disability insurance from their employers. Fewer companies are offering workers’ benefits, and many workers don’t qualify for employer benefits. Often, people who are self-employed, contract, casual, part-time, seasonal, on probation, or temporary don’t have short-term disability insurance.

Two ways workers without employer short-term disability plans can get some income protection in the event of an illness or injury are through private plans and Employment Insurance (EI) sickness benefits. EI benefits are government-run, so you don’t need to pay any additional premiums.

Private plans allow you to purchase short-term disability insurance, long-term disability insurance or both. Each insurer has specific criteria you must meet to qualify. In addition, prices differ, so it’s best to compare features, benefits and prices of disability insurance to get the plan best suited to your situation. One of the advantages of a private plan is that it accompanies you wherever you work. If you have short-term disability coverage at your place of work and leave your employer, you will lose this coverage.

Employer short-term disability plans

The insurance is typically offered as part of a group benefits package. Examples of problems covered include physical injuries like a broken bone, torn ligament, or an issue you might need surgery for such as acute appendicitis. In addition, short-term disability insurance can cover a wide range of health conditions, including mental health issues such as depression and anxiety.

The short-term disability plan your employer provides may be through a group insurance plan or funded by the employer. As an employee, these plans will look very similar to you. The difference is the insurer makes the benefit payments through a group insurance plan, but the employer funds the plan if there is no insurer.

How do I know if my employer offers short-term disability insurance?

Employers typically disclose information about your benefits in writing. They may include it with your offer of employment or will give you the information when you are hired as part of the onboarding process. There, you’ll find details about any short-term disability insurance they offer.

You can contact your HR department if you are still trying to determine if you have short-term disability insurance. They will give you the information you need regarding your benefits.

Be careful what jobs are covered by your insurance

Each plan defines “short-term disability” differently. For example, some plans will state that you must be unable to perform any occupation. This means that your disability leaves you unable to work at your regular job or any other job.

Other plans will consider approving you for short-term disability if you cannot perform the duties of your own or regular occupation. If you can’t do the regular functions of your job, you may be eligible for short-term disability benefits even if you could do other jobs.

It’s essential to review the terms and conditions of the policy to find out how it defines a disability, what conditions are covered, how to apply, and what you need to do to keep your claim in force.

How much does short-term disability pay?

Since plans differ between employers, the payments of various plans vary too. For example, some plans offer 50% of your gross wages, while others can cover 100%. Typically though, the amount ranges between 60-85% of your regular wages.

Plans sometimes pay percentages based on the amount of time you are off. For example, your plan may pay 100% for the first 6 weeks and 65% after that. Therefore, getting the information regarding your specific plan is essential so you’ll know what to expect if you need to access your short-term disability insurance.

How long are payments made?

The number of weeks you can receive short-term disability benefits is another feature that varies. Your plan may cover you for 17 weeks or make payments for up to 12 months. Many plans offer 6 months of coverage. You’ll find the length of your short-term disability plan disclosed in your benefits package.

How do I qualify?

Short-term disability insurance provides financial support for workers who cannot perform the regular duties of their occupation due to illness or injury. You will need to apply for approval to receive benefits.

Proof of disability

Insurance plans typically want a doctor’s confirmation of your condition or symptoms to support your claim. Additionally, the insurer may require an Employer’s Statement that details your job’s responsibilities, hours, and wages. You might also need to submit a Claimant Statement. You can get any forms you need from your HR department.

Employment details

Your plan will have the details regarding how you qualify for short-term disability insurance. In some cases, you will need to have completed probation and be considered a permanent employee. In addition, the plan may require you first to use any sick days, vacation days, and paid days off you’re entitled to before receiving insurance payments.

Can I receive employment insurance and disability benefits at the same time?

If you are receiving short-term disability payments, you cannot get Employment Insurance (EI) sickness benefits at the same time. There may be an oversight where you receive payments from both short-term disability and EI sickness. However, if this happens, you will have to repay your EI sickness benefit payments.

You may qualify for EI sickness benefits if you use all your short-term disability benefits and cannot return to work. EI sickness benefits last up to 15 weeks, so they can provide an additional source of income if your short-term disability benefits run out.

Can my claim be denied?

Your claim could be denied for several reasons. Each plan will have specific criteria allowing the insurer to deny a claim. Some examples are participating in high-risk activities such as bungee jumping, pre-existing conditions as outlined in the policy, or still being on probation at work. Therefore, it’s important to become familiar with the exclusions of your policy.

One common reason that insurers deny claims is the applicant didn’t complete the necessary forms. The insurer will contact you to let you know if your claim is or isn’t approved. If it has been denied, they will tell you why.

What can I do if my claim is denied?

Your claim could be denied for several reasons. Some common ones are:

• The insurer requires the correct paperwork from you and your physician. If you don’t provide it, they can deny your claim.
• The policy may have exclusions, and your disability falls under one of them. 
• You don’t follow up with treatment or communicate with the insurer.
• The insurer determines you can still perform the duties of your occupation despite your disability.

Find out why

The insurer will let you know if your claim is approved, delayed, or denied. The first step in challenging a delayed or declined claim is to find out why you were not approved. Sometimes it’s simply a matter of providing the insurer with the correct information. If you’re struggling with this, your Human Resources department or the insurer can often help.

If the insurer denies your claim, you have three choices. The first is to accept the decision and let it go. Next, you can file an internal appeal. Finally, you can consult a lawyer to see if you have a case to pursue legal action.

Take action

Some people will accept the insurer’s denial because they don’t have the energy or don’t feel knowledgeable enough to challenge the decision. Others may not want to raise the issue because they think it might jeopardize their employment. Unfortunately, people in this position could miss out on the benefits they are entitled to receive.

File an appeal

A second option is to launch an internal appeal. Sometimes, you must begin the appeal by the deadline stated in the denial letter. The insurer conducts the appeal, and you may have two or three rounds of appeals available if your claim is not approved on the first appeal. If these also fail to get approval and you are in a union, you can have an appeal hearing. The decision of the appeal hearing is final.

Get legal advice

Finally, you can hire a lawyer to review your case. Your lawyer can launch a lawsuit, allowing either a jury or a judge to decide your case. Complainants sometimes ask for additional compensation to cover expenses incurred because their initial claim was denied.

What happens when my short-term disability ends?

When your short-term disability ends, you may have a few options available. The first is to return to work if you are able. If you cannot perform the duties of your previous job, your employer may be able to make accommodations for you so you can return to work or find another position in the company for you.

Government benefits

If you are unable to return to work, you can apply for Employment Insurance sickness benefits. This government plan will pay a maximum of 55% of your salary for up to 15 weeks. There are specific criteria you need to meet in order to qualify.

Long term disability

You can apply for long-term disability if your injury or illness is still present and your employer offers long-term disability benefits. Like short-term disability, long-term disability insurance pays a percentage of your income. But, again, you’ll need to check with your employer regarding the benefits available and how you can apply.

Can my employer fire me while I’m on leave for a disability?

Your employer can terminate your employment if you are on short-term disability, but they cannot fire you for being disabled. There are many reasons why an employer might terminate your employment, and they can do so if you are on short-term disability as long as they follow the applicable employment laws.

Can I apply for short-term disability benefits if I am pregnant?

If you cannot perform your job duties due to complications from your pregnancy or other health-related reasons, you can apply for short-term disability. It’s best to talk to your doctor first, so you know what to expect.

Can I travel out of the country while I’m receiving benefits?

You can, but it’s not usually a good idea. If you’re on short-term disability, the insurer expects you to focus on recovering and not taking vacations. They could terminate your benefits if they find out you have been travelling while on short-term disability.