April 12

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Long-Term Disability Coverage Is No Longer A “Nice to Have”

According to the United States Social Security Administration, approximately one in four 20-year-olds will become disabled before reaching 67. In Canada, more than 62 percent of Canadian employees were exposed to someone who had to take time off of work due to a disability, and 25 percent had to take time off themselves.

Disability cases have been climbing, and in light of what we went through over the last two years, many start-ups are reevaluating their benefits structure to accommodate the modern needs of their employees by providing long-term disability (LTD) coverage.

Long-term disability cases are increasing, and most issues aren’t physical

These last two years have been particularly demanding for Canadian workers, especially when it comes to mental health-related challenges. Indeed, based on Statistics Canada’s labour force survey and Canadian income survey, the number of mental health-related disabilities has increased by 2.3 percent between 2019 and 2021. 

Additionally, the surveys found that the most affected demographic group is women between 16 and 24. Cases of mental health-related disability among these women rose by 7.6 percent from 2019 to 2021. Likewise, employed women in the core working ages of 25 to 54 were subjected to a 4.7 percent increase in mental health-related disability since 2019.

But despite demographic distinctions, this is an issue that affects the entirety of the workforce.

Take in this example about how much income is lost when there’s no LTD in place:

A 30-year-old developer is making $100,000 and has to take a leave of absence from her work. That works out to $8,333.33 per month of lost income. At 66.67% (the LTD coverage amount) that’s $5,555.83 per month in LTD compensation. That works out to $66,669.96 per year. If you have family who depends on this income, having coverage is a safety net you hope to never have to use, but will feel relieved when you do.

Yet, not enough startups have long-term disability coverage in place

Workers and employers continue to underestimate the likelihood that a situation of this kind may happen to them or their employees. This is evident in that only a few startups choose to include LTD coverage in the benefits plan they offer their workers. For instance, only 29 percent of Orchard Benefits’ clients provide this benefit to their workforce. As the competition for talent increases, more startups are looking at LTD – that 29% will likely increase this year.

While LTD may seem like a personal problem to the affected employees, more startups should shift their perception of the matter. When employees become unable to work, it also has repercussions on the business for whom they work, losing a valuable team member. In these cases, employers have a responsibility to care for and help the employee.

What does a long-term disability coverage plan entail?

LTD insurance aims to provide workers with income replacement in the eventuality that they experience an unfortunate situation, at or off work, that would impede their ability to work. Most LTD plans have a 119-day waiting period before coverage kicks in and covers a percentage of the employee’s base salary to financially support them.

However, as observed by Dutton Law, long-term disability policies generally provide LTD benefits for the first two years when the affected individuals cannot work in their ‘own occupation’. “After two years, long-term disability benefits are generally only paid if they cannot return to work in ‘any occupation.’”

LTD coverage is more than a safety net for your employees–it can potentially be their sole lifeline. 

How to protect your employees

In a perfect world, all employers would offer LTD coverage to their employees. But unfortunately, the reality is that some startups are subject to financial limitations that restrict their ability to go above and beyond with their benefits offering. The good news is that there are still ways to offer competitive plans to your employees despite not being able to provide group LTD insurance.

Additionally, you may opt for a more preventative approach and organize workshops meant to teach or remind employees of the importance of psychological welfare and how to take care of their mental health. Beyond workshops, you may also provide gym access and other relevant perks that promote looking out and upkeeping a healthy mental state.

While your startup may face some limitations, the rising cases of LTD among Canadian workers depict a shift in their needs. The time may have come to further look into providing an LTD coverage plan to your workers to minimize both your losses. 

If you wish to learn more about the way your startup should go about this change and set up this benefit, contact us and we can guide you through the entire process.

About the author 

Chris Gory

Chris Gory is the founder of Orchard Benefits (formerly Insurance Portfolio Financial Services Inc.), a brokerage launched in 1999 that helps companies build the best benefits programs for their employees. Chris is passionate about helping entrepreneurs, and works with over 80 startup companies. He is an advisor at the Ryerson DMZ and he's led talks about employee benefits and insurance at several startup accelerators including Extreme Startups, OneEleven, and Ryerson's Startup School. Chris has also been featured in the Toronto Star and The Globe & Mail, and was a member of the Board of Directors of the Applied Client Network, an international association of independent insurance professionals, from 2012-2018.


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