If you’ve ever found yourself injured or ill and unable to work, you may have heard the terms Short-Term Disability (STD) and Long-Term Disability (LTD) benefits. But what do they actually mean? And how do they differ from one another? The following will help you understand the differences between these two benefits. However, you should always consult your benefits booklet and policy to know your coverage.
What Is Short-Term Disability (STD) Insurance?
STD is often the first line of financial support when you’re temporarily unable to work due to illness or injury. If you’re off work due to a broken leg, surgery recovery, or another short-term issue, STD coverage will help replace a portion or all of your income until you are able to return to your job.
What Is Long-Term Disability (LTD) Insurance?
LTD is a type of insurance that provides income replacement if you’re unable to work for an extended period due to an illness, injury or disability. It’s a financial safety net that allows you to focus on recovering without the stress of losing your income completely. The exact terms, including how long you can claim LTD benefits and how much you’ll receive, will depend on the specifics of your insurance policy.
When Can I Start Receiving STD versus LTD Benefits?
STD is often available after a short waiting period – typically a few weeks to a few months.
LTD normally requires a longer waiting period (known as an “elimination period”) and is designed for more severe, long-term conditions, illness, or disabilities. The waiting period might be anywhere from a few months to over a year, depending on your policy and the nature of your disability.
How Long Can I Receive Short versus Long-Term Disability?
In Ontario, the duration of STD varies, but it usually lasts for a few weeks to up to 6 months, depending on your policy of insurance. For example, if you’re diagnosed with an illness and need to take time off to recover, STD insurance could cover you for this short period.
After this, if you still cannot return to work, you might transition to Long-Term Disability benefits, provided you have that coverage in place. These benefits are intended for long-term situations and the insurance helps replace part of your income until you are able to return to work, or until the benefit period ends. This can range from a few years to up until retirement age, again depending on the terms of your policy.
What is the Coverage Amount for STD versus LTD?
STD often covers a higher percentage of your income, sometimes up to 100% for a brief period.
LTD usually covers a lower percentage, often around 60%-85% of your pre-disability salary depending on your policy of insurance, since it’s meant for longer-term support.
What is the Change of Definition Test, and Does it Apply to Both STD & LTD?
There is no change of definition clause for STD. To receive this benefit, you must only show that you are unable to perform the tasks of your own job.
All disability policies will include a “change of definition” clause which shifts the criteria for receiving LTD benefits after a certain length of time. This change will typically take place at the 2 year mark – i.e. two years from when you started receiving LTD benefits. In the initial 2 years, the disability test is whether you can return to work in your own occupation. After the 2 year mark, the test changes to whether you can perform any occupation for which you are suited by virtue of education, training, or experience.
What is an LTD Deduction on Your Paystub?
If you have LTD insurance through your employer, you might notice a deduction on your paystub when you are working and not disabled, sick or ill. This deduction is typically a regular payment taken from your salary to fund the insurance in case you become disabled and cannot work in the future.
Employers might cover part of the LTD premium, but employees usually pay or “contribute” a portion as well. In Ontario, many employers offer LTD coverage as part of their benefits package. The premium amount that you pay will vary depending on factors like your income, occupation, and the specifics of the insurance policy your employer has chosen. The deduction on your paystub reflects this amount.
There is typically no specific deduction for STD benefits on your paystub; or, it is included as part of the LTD deduction.
Conclusion
Understanding the difference between Short-Term Disability and Long-Term Disability insurance is essential to knowing how to protect yourself in case of illness or injury. STD helps in the short term, while LTD takes over for long-term issues that prevent you from working indefinitely. Knowing when and how each type of benefit works can make a big difference in how you manage your income and recovery if something goes wrong.
It’s always a good idea to review your insurance benefits to ensure you understand your coverage, how much you’re paying for it, and how long you can rely on it if you need it. If you have any questions about your specific policy, don’t hesitate to reach out to your HR department or insurance provider for more information.
If you find yourself in the difficult situation where an insurance company has denied your initial application for LTD benefits or has terminated your LTD benefit after a certain period of time, don’t hesitate to contact Matthews Abogado Long-Term Disability Lawyers for help.