Long-Term vs. Short-Term Disability in Ontario

An employee suffering from a disability making them unable to work can be a significant life event. Understanding the differences between short-term and long-term disability benefits is crucial for employees who find themselves in this situation.

In Ontario, many jobs come with a feature in an employee’s employment contract with financial compensation intended to help replace their normal salary if they suffer a health issue (disability) rendering them unable to work, either in the short-term or long-term. These are referred to as Short-Term Disability (STD) and Long-Term Disability (LTD) benefits coverage.

Short-Term Disability (STD) Coverage

Short-term disability insurance provides financial support for a limited period when an employee is unable to work due to illness or injury. This type of coverage is often offered by employers as part of a benefits package, and it is typically a direct policy with a health insurance company, such as Sun Life, Manulife, Canada Life, and so on.

As long as an employee has short-term disability benefits coverage at the time they become disabled, they typically qualify to receive short-term disability benefits. The medical conditions covered by a policy range from physical to psychological, cognitive, or emotional (e.g., depression).

Key features of STD Coverage:

Duration: Typically lasts for a few weeks or up to 6 months.
Eligibility: Generally requires a waiting period before benefits start, such as 30 days.
Benefit amount: Replaces a portion of an employee’s normal income (usually between 60% – 85%).
Purpose: Provides temporary financial support while recovering from a short-term illness or injury.

Long-Term Disability (LTD) Coverage

Long-term disability insurance kicks in after the short-term benefits expire. It is designed to provide financial support for a more extended period, often years or until retirement age.

Key features of LTD Coverage:

Duration: Can last for years or until retirement age, depending on the policy terms and conditions.
Eligibility: Requires a more severe and long-lasting disability than STD, including the test of “totally disabled”.
Benefit amount: Usually replaces a portion of an employee’s normal income (usually between 60% – 85%).
Purpose: Provides long-term financial security for individuals unable to return to work.

Important Considerations

Waiting periods: Both STD and LTD policies have waiting periods before benefits start. The waiting period for STD benefits is relatively short compared to LTD benefits and can be as short as 1 day or as long as 2 weeks.
Definition of disability: The definition of disability can vary between policies, so it is important to understand the specific terms of your coverage. However, generally speaking, most disability insurance policies define “disability” during the STD claim is usually whether or not an employee is able to perform the essential duties of their own (or similar) occupation. The definition of disability during the initial part of an LTD claim is typically the same, focusing on an employee’s ability to work in their own occupation.
Benefit amount: The amount of your disability benefit is typically based on a percentage employee’s income.
Claim process: Submitting a claim for LTD can be more complex and time-consuming than for STD due to the nature of the disability.

What if an Application for Short-Term Disability or Long-Term Disability is Denied?

A health insurance company often denies employees’ claims for STL or LTD benefits for many reasons, one of which may be that the insurer does not believe the employee is “totally disabled” and eligible under the insurance policy. Even if the employee has sufficient documentation to support their claim for benefits including medical records and doctor notes, it may be deemed insufficient.

In these circumstances, an employee who has been denied STD or Ltd disability benefits has main two options:

The first option is to appeal the decision with the health insurance company internally. Typically, an employee may be able to appeal up to three times, and each one must be done within 90 days of the decision by following the applicable deadlines in the denial letter. Typically, insurance companies look out primarily for their own interests and, as a result, most internal appeals are unsuccessful.
The second option is to commence a lawsuit against the insurance company for wrongful denial of disability benefits. To achieve the best outcome, it is best to hire an Ontario employment lawyer who specializes in disability law. By relying on their knowledge and expertise, it provides an employee a better chance to recover financial compensation for their STD or LTD benefits.

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