September 6


Why Long-Term Disability Insurance is a Growing Trend

Most people don’t think about the worst-case scenario in life. In fact, our brains are actually wired with this defense mechanism in place so that we don’t allow those stressful overriding thoughts to commandeer our lives.

We’ve long been of the mindset that we really only start to proactively take care of our futures when we have a significant other, or are looking to start a family – but what about just taking care of ourselves? Every twenty-something thinks they’re invincible – until an injury hits close to home to a family or friend and then it starts to trigger the warning signs.

Now disability isn’t necessarily a permanent injury that is deemed catastrophic – but rather it’s a health condition that renders you unable to work for an extended period of time – typically within a three-month timeframe. And if you’re unable to work, you could be haemorrhaging debt just to stay afloat. In fact, a 2007 Harvard study found that medical problems contributed to over 60% of personal bankruptcies.

As I speak with more and more companies, the topic of offering long-term disability insurance keeps coming up – and we’re starting to see why.

Is LTD Coverage Now Being Viewed as a Value Proposition?

Nobody is invincible and impervious to accidents, and the risk and impact of disability is far greater than we can imagine. One of the main reasons people gloss over disability insurance is because they don’t think they will ever need it. In fact, illnesses actually account for 90% of all claims, contrary to the popular belief that accidents are the driving force for why we need this type of coverage.

The reason why this narrative is picking up steam is because there’s a change in the disability landscape, with musculoskeletal conditions such as arthritis, back problems or sciatica as the primary reasons for a leave of absence. And a lot of companies recognize how devastating it can be for an individual to not have that safety net of income to rely on, not to mention how expensive it is to go to a private firm for a quote. This is an important element in taking care of your human capital and has long been an overlooked aspect of an employee benefits package.

How Does Long-Term Disability Work With Startups?

Working with a lot of early-stage startups, the demographics of the staff are usually in the Millennial range – meaning they still fall under the “it won’t happen to me” category. Or they may still be of the mindset that they have their parents as a safety net should any issues arise. Now in light of that, what I’m seeing from a lot of companies do nowadays is they will have one level of coverage for everybody and then the entire company gets it to safeguard them from problems down the line. And typically benefit eligibility would count for 67% of their taxable income.

What are Non-Evidence Maximums?

The non-evidence maximum (NEM) is the amount of coverage that the insurer will provide to employees without providing medical evidence of good health. What this means is having a high non-evidence maximum would be an important aspect of the LTD plan because it would guarantee an employee a minimum level of coverage based on their income.

For example, what happens is the insurance company would say, based on the size of your company each person qualifies for up to say $8,000 dollars a month – but what they do with high amounts of long term disability coverage is they will guarantee the first (could be) $3,500, and then you have to be medically approved for everything above and beyond that. Whatever the scenario is, that $3,500 is guaranteed. Now what a lot of companies will do is they will put a plan in place but their employees won’t apply for the non-evidence maximum, so instead of being eligible for $8,000 a month – they might only receive the minimum $3,500.

The other thing is that they forget to notify the insurance company of any salary changes altogether. When this individual then goes on disability and they’re expecting disability based on their new salary, an oversight is now preventing them from recouping the full amount they should be entitled to.

Don’t Just “Set-It-And-Forget-It”

What I unfortunately still see is that people would just put it in place and just kind of forget about it – and it can be extremely costly. Make sure that you are actually doing the salary changes and that employees are applying for all the coverage they’re actually eligible for.

If you work with someone who has been in the industry for a long time and who really cares about their customers – you won’t forget these things because they will help keep you on track. If you have questions about how we can meet your benefit needs – get in touch with us today.


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.


long term disability, long term disability coverage

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