Both Short Term Disability Insurance and Long-Term Disability Insurance provide the security of income protection for employees as a result of either a short-term or long-term absence from work from an accident or sickness. This type of coverage increases employee retention and positions the business as a desirable place to work specific to their industry.

Short Term Disability

According to The Conference Board of Canada, organizations without a short-term disability plan in place experience almost twice the paid sick leave costs as those organizations with a short-term disability plan.

Short Term Disability benefits cover a limited amount of time, usually 6 to 26 weeks depending on the condition. The benefit schedule is generally based on the plan member’s income and does not exceed 66.67% of the total after tax income.

Long Term Disability

Long Term Disability (LTD) insurance is an optional benefit for your Group Benefit plan. If plan members are unable to work for an extended period of time LTD benefits will provide the plan member with monthly income replacement. The most common elimination period for this benefit is 17 weeks (after EI and short-term disability coverage). The benefit schedule is based off the plan member’s pre-disability gross earnings. Unless the plan member is paying their entire LTD premium, the benefit will be taxable when received.

A taxable LTD benefit will be based on 75% of the plan member’s pre-disability gross earnings whereas a non-taxable LTD benefit will be based on 66.67% of the plan member’s pre-disability gross earnings.

The benefit period, or maximum time the benefit is paid, is usually to age 65. The longer the benefit the higher the LTD rates thus some plan sponsors may choose a 3- or 5-year benefit maximum.

Both Short Term Disability and Long-Term Disability help ensure your employees are covered for lost wages as a result of an accident. On average, 25% of today’s 20-year-olds will become disabled at some point in their career, which will result in lost wages, before they retire.

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