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CAN MY INSURANCE COMPANY INSIST I APPLY FOR CANADA PENSION PLAN DISABILITY BENEFITS?

Whether your insurance company can insist you apply for Canada Pension Plan (CPP) disability benefits depends on the language in your agreement. Ultimately, an insurance company can insist you apply for CPP disability benefits and you must follow any language in your agreement that requires you to seek alternative benefits.

Here’s what you need to know about CPP disability benefits and the situations in which your insurance company can push you to apply for them.

What are Canada Pension Plan disability benefits?

Unlike Canada Pension Plan (CPP) retirement benefits, which are available to you as an income replacement when you retire from work and reach the age of 60, CPP disability benefits are given to you if you: 

  • Are under the age of 65,
  • Have made valid contributions to CPP, and
  • Have a severe and prolonged mental or physical impairment that prevents you from pursuing gainful work.

CPP disability benefits are paid monthly and are taxable.

According to the CPP Toolkit:

  • A person is considered to have a severe disability if they are regularly incapable of   pursuing any substantially gainful occupation.
  • Prolonged means the disability or impairment is long-term and of unknown duration What is the maximum monthly amount of a CPP benefit?

As of 2022, if your CPP claim is approved the maximum monthly benefit amount is $1,457.45. Your benefit will be based on your specific contributions to CPP. You can obtain an estimate of your disability benefit amount from Service Canada. There may be additional amounts paid for eligible children under age 18.

What is the relationship between CPP and Long-Term Disability Benefits?

Most long-term disability group insurance policies (LTD policies) contain provisions that permit the insurance company to deduct CPP disability benefits from your long-term disability benefit each month. The insurer will deduct the gross (before tax) amount of your CPP disability benefit from the amount they give you.

The amount deducted is the original amount that you were approved for, as most disability policies do not allow the insurer to deduct the cost of living increases in your CPP disability benefit that you may receive each year. This means that even if your CPP disability benefit increases for cost of living, in most cases the amount deducted from your long-term disability insurance will stay the same.

Are the benefits I receive for my children a deduction?

This very much depends on the wording contained in your LTD policy. Most disability policies do not deduct children’s benefits directly but the benefits may be deductible as part of overall income received under an indirect offset provision.

Can the insurer terminate my benefits if I do not apply for Canada Pension Plan disability benefits?

Yes, in some cases. Your LTD policy may specifically state that you are required to apply for these benefits and by law you do have an obligation to make efforts to seek alternative benefits available to you.

The LTD policy may also state that the insurer can estimate the benefit amount you would receive from CPP even if you are not actually receiving it. The insurer can then deduct the estimated amount from your LTD benefits.

Why would I apply for Canada Pension Plan Disability Benefits if it will reduce my LTD benefit amount?

  1. Applying could potentially decrease the likelihood that the insurer will terminate your long-term disability benefits, especially at the point where your test for disability changes to whether you can work in any occupation.
  2. The test for disability under the CPP legislation is more onerous than the tests under most LTD policies and although approval for CPP disability does not guarantee ongoing receipt of long-term disability benefits, it does strengthen the evidence that you are unable to work in any occupation.
  3. If your LTD benefits are denied or terminated and you have applied for CPP disability benefits, you will have an ongoing source of income while you address the denial or termination of your long-term disability benefits.
  4. Applying for CPP disability benefits does not reduce your retirement allowance as receipt of CPP disability benefits provides the explanation for your failure to contribute to the CPP program on an ongoing basis.
  5. Once you are approved for CPP disability benefits there is the possibility that if you continue to qualify, you can receive these benefits until age 65 when they convert to retirement benefits. That is different from LTD policies and LTD claims where insurers are frequently reassessing your entitlement to LTD benefits and can deny your benefits for multiple reasons.

If I apply for Canada Pension Plan Disability Benefits does that mean I can never return to work?

If you are in receipt of CPP disability benefits and your health improves enough that you are able to return to the workforce or begin retraining, you should report that to Service Canada.

Service Canada will work with you to determine whether you continue to be eligible or whether your benefits terminate. You can earn up to a certain amount per year without losing your disability benefits (the 2022 amount is $6,400 gross). CPP may also have programs that can assist you with the return to work process such as the CPP Disability Vocational Rehabilitation Program.

If I receive a lump sum from CPP can the LTD insurer take that?

If you are in receipt of benefits and you are approved for a retroactive payment from CPP, you may have signed documents (Consent and Deduction to Pay) which will allow the insurer to receive repayment of the amounts that they paid for the overlapping periods directly from Service Canada.

Alternatively, the insurer may indicate to you that there has been an overpayment for the overlapping periods and ask you to repay the overpayment amount.

If you do not repay the CPP amounts to the insurer they may terminate your benefits or reduce your benefits until the overpayment has been satisfied.

If you have any issues relating to your claim for long-term disability and CPP disability benefits, you should discuss your circumstances with an experienced lawyer. MK Disability Lawyers LLP are experienced lawyers dedicated exclusively to the practice of and related employment issues. We would be happy to provide you with a free consultation. Please contact us by calling 844-697-4600. If you have specific questions about LTD claims, please also contact us to schedule a free individual consultation.

The preceding is not intended to be legal advice. This blog is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog, you understand that there is no solicitor-client relationship between you and the blog publisher. The blog should not be used as a substitute for competent legal advice from a licensed lawyer in your jurisdiction. If your disability claim has been denied and you require legal advice, contact a lawyer specializing in disability law.