Glossary of Long Term Disability Insurance Terms

Long term disability insurance is associated with specialized terminology, some of which is highly technical and uncommon in everyday language. When a long term disability claim is denied, additional terms typically only used by lawyers and claims professionals can make understanding the claims process even more difficult. This glossary of LTD terms defines some of the more commonly used language.  For further explanation, do not hesitate to contact Michael Jordan for no cost legal advice.

A

Actively At Work – This term is usually defined in the policy, but typically means someone who is working a normal workweek for their usual employer.  You must be actively at work as of the date of disability in order to qualify for long term disability benefits.  The policy may include an expanded definition to address situations such as temporary layoffs, maternity leave, or other special circumstances.

Active Work Requirement – The date of disability must occur when you are still employed and Actively at Work in order to be eligible for benefits.

Activities of Daily Living (ADLs) – Regular everyday activities such as eating, bathing, dressing, toileting, walking and other similar activities.

Adjuster – An employee of the insurance company that investigates disability claims and decides whether to pay the claim or not.  The adjuster may go by other titles, such as claims examiner, case worker, disability claim manager, or something similar.

Administrative Services Only (ASO) – Where an employer funds their employee benefit plan but contracts with an outside insurer or other company to administer it.  For example, a large bank might agree to pay short term disability benefits for its employees, but contacts with an insurance company to make the decision whether the employee is disabled and entitled to payment.

Aggravated Damages – Money awarded by the court for emotional harm and distress caused by the way in which the insurance company assessed and denied the claim.

Alcoholism Exclusion Clause / Substance Abuse Exclusion Clause – An exclusion contained in the policy where the insurer does not have to pay disability benefits unless certain conditions are met, usually abstinence or while admitted to an inpatient facility.  

Any Occupation – One of two common tests of disability (the other being “Own Occupation”).  “Any occupation” means work other than the individual’s own occupation for which they have the necessary training, education, and experience.

Appeal – When an LTD claim is denied, the insurer will usually offer an appeal process where you can ask for a review of the decision. The appeal is almost always determined by the same company that decided to deny the claim.  Some companies will allow up to three appeals.

Attending Physician Statement (APS) – One of the insurance forms required early in the claims process by the insurer.  It is completed by your doctor or other medical professional. Sometimes insurers will ask for updated APS forms as the medical evidence and the claim evolves.

B

Bad Faith – Conduct on the part of an insurance company that falls outside the requirement that it act with the utmost good faith.  A finding of bad faith by a judge could lead to an award of punitive damages and/or aggravated damages.

Beneficiary – A person named to receive the proceeds or benefits from an insurance policy.

Benefit Booklet – A summary of the benefits provided by the policy.  The benefit booklet wording may differ from the wording contained in the actual policy.  The policy wording prevails over the booklet.

Benefit Period – The duration for which benefits may be paid. Many policies have a benefit period that extends to age 65, whereas others are limited to a specific number of years.  Some policies provide lifetime benefits.

C

Canada Pension Plan Disability (CPP-Disability) – A federally funded disability program that is separate from retirement CPP.  In order to qualify you must have a severe and prolonged disability of indefinite duration that precludes any employment.

Change of Definition – When the test of disability changes from “own occupation” to “any occupation”, usually after two years.

Claimant’s Statement or Plan Member’s Statement – A form completed by the individual claiming benefits at the beginning of the claim.  Usually submitted at the same time as the attending physician’s statement and the employer or plan sponsor’s statement.

Conversion of Coverage – If your employer provides group coverage, and your employment ends, you may be able to convert the group coverage to an individual policy without evidence of good health.  

Cost of Living Adjustment (COLA) – A provision contained in some policies that increases the monthly benefit annually to account for inflation. COLA may be based on the Consumer Price Index or some other fixed percentage.  Most group policies do not contain a COLA.  Many individual policies do.

D

Date of Disability – the date you are no longer able to work.

Declaration Page – The part of the insurance policy that provides a summary of the coverage available.

Defendant – A person or company who has been sued by a plaintiff in a lawsuit.

Direct Offset – The amount an insurance company can deduct from the monthly benefit amount. Direct offsets are defined by the policy, and often include CPP-disability, employment income, severance pay, and others.

Diagnostic and Statistical Manual of Mental Disorders 5 (DSM-5 of DSM-V) – The standard classification of mental disorders used by mental health professionals.

E

Effective Date – The date the insurance coverage begins.

EI (Employment Insurance) Sickness – A type of EI only available for 15 weeks to individuals who cannot work due to sickness, illness, or injury.

Elimination Period (or Waiting Period) –The elimination or waiting period is the time between the date of disability and the date long term disability benefits start. The disability must continue throughout the entire elimination or waiting period to be eligible for LTD benefits.

Employer’s Statement or Plan Sponsor’s Statement – a form completed by the employer or organization that arranged for the group benefits plan at the beginning of the claim.  Usually submitted at the same time as the attending physician’s statement and the claimant’s statement or plan member’s statement.

Exclusions – Something that is not covered by the insurance policy.  For example, many group policies contain an exclusion for pre-existing conditions, but generally that exclusion only applies for the first year of coverage under the policy as set out in an exception to the exclusion.

Extracontractual Damages – A monetary award made by a court for something other than the benefits outlined in the policy.  Extracontractual awards include punitive damages, aggravated damages, and general damages.

F

Functional Capacity Exam or Functional Abilities Exam (FCE or FAE) – A test of your physical abilities. Various tests are administered in an attempt to determine your capacity to work in sedentary, light, medium, or heavy strength demand occupations.

G

Gainful Employment – The amount of income you would have to earn to no longer be entitled to disability benefits.  Gainful employment is often defined in the policy as a percentage of your pre-disability income, and typically relates to the “any occupation” test of disability.

Group Coverage or Group Policy – An organization, usually an employer, takes out a policy of insurance to cover all or some employees.  The coverage is usually not as comprehensive as what may be available under an individual policy.  Typically there is no individual underwriting for group coverage, so the policy may contain more general exclusions than an individual policy.

I

Independent Medical Examination (IME) – An assessment by a highly qualified physician or psychologist retained to provide a medical opinion.  IME’s can occur during the claims process in accordance with the policy, and also in litigation.

Indirect Offset – Sources of income the insurance company can apply to possibly reduce the benefit amount, but not directly.  The calculation of how indirect benefits impact the benefit calculation is contained in the policy.

 Individual Policy – A policy purchased directly from an insurance broker. The individual is responsible for all costs. Typically better coverage and more options are available compared to group coverage, but with higher premiums.

Insured – The individual covered by insurance. Can also refer to the organization (for example the employer) that obtains the policy.

J

Job Site Analysis (JSA) –  An evaluation of an employee’s job demands including the physical and cognitive demands required to perform the essential job tasks.

L

Limitation Period – The deadline by which a lawsuit must be commenced.  In Ontario the limitation period for long term disability claims is usually two years from the date of denial, but this may be extended in limited circumstances.

M

Maximum Monthly Benefit – The most an insurer is required pay to a disabled individual under the policy.  For example, the policy may provide 65% income replacement, but only to a maximum of $3,000 per month.

Medical Consultant – A medical professional, usually a doctor, retained by the insurance company to review the available medical records and provide an opinion to the insurer. This is usually part of the internal claims file, and not disclosed to the individual claimant unless specifically requested.

Mitigation (Duty to Mitigate) – A legal principle that requires plaintiffs to reduce their losses.  In the long term disability context, mitigation could require attempting to return to work.  

N

Non-Evidence Maximum – The most an insurer will pay under a group policy without the individual providing evidence of good health before the date of disability.  If evidence of good health is provided, a higher benefit amount may be available for a higher premium.

O

Ontario Disability Support Plan (ODSP) – A provincially funded financial assistance program that may provide monthly income, prescription coverage, and assistance returning to the workforce.  Family income and assets must be below a specified threshold to qualify.

Offset – Income or other payments that reduces the amount of LTD payable. There are both direct offsets and indirect offsets listed in most insurance policies.

Own Occupation – An individual’s occupation as of the date of disability.  Usually the test of disability for the first two years requires that the claimant be disabled from performing the essential or important duties of his or her own occupation. The test of disability often changes to the more stringent “any occupation” test after two years, although time periods vary. Many individual policies do not contain a change of definition.

Own occupation rider – The portion of an individual policy that states benefits will continue so long as the insured is unable to engage in their own occupation.

P

Plaintiff – Someone who starts or initiates a lawsuit. The plaintiff is usually seeking money or other relief from the defendant.  In the long term disability context, the plaintiff usually seeks payment of past benefits owing to the date of judgment, interest on past benefits owed, a declaration that the court instate or reinstate payment of benefits, and damages.

Plan Member – An individual who is covered and entitled to benefits under a group plan. 

Policy – An insurance policy is special type of contract between an individual or a group of people and an insurance company. The policy contains all the terms and conditions that govern the relationship between insurer and insured.

Policyholder – an individual or employer who purchases an insurance policy from an insurer.

Pre-existing Condition – a medical condition that exists prior to the effective date of the policy and for which a person has received medical care. In most group policies, there is a pre-existing exclusion during the first year of coverage. This timeframe is sometimes referred to as the pre-existing condition exclusionary period.  Pre-existing exclusions vary considerably by insurers and by policies.

Pre-Disability Earnings – The amount of a policyholder’s wages or salary in effect on the day before the disability began.  This may or may not include bonuses, commissions, and other income.  

Premium – The payment required for insurance coverage to be placed and to continue.  In group plans, the premium could be paid by the employer, the employee, or shared. Who pays the premiums determines whether the benefit is taxable.

Punitive Damages – A monetary award to punish and deter exceptionally bad behaviour. Punitive damages awards in long term disability claims in Canada are rare.

R

Recurrent Disability – A policy term that allows someone in receipt of benefits to attempt to return to work without fear of having to submit a new claim if the return is not successful.  If the inability to continue with the attempted return to work occurs within a certain timeframe is due to the same medical condition, the insured may go back on claim without having to reapply with a new elimination period.

Recurrence Period – The duration someone can attempt a return to work before any subsequent inability to work is considered a new disability.

Rehabilitation Benefits – Vocational or rehabilitation services paid for by the insurer to help the individual return to work.

Relief From Forfeiture – The authority of a court to grant relief from strict adherence to policy terms.  For example, a court may grant relief from forfeiture if a claim is submitted outside the time limit required by the policy.

Residual Disability or Partial Disability – A defined term contained in some individual policies that allows for continuation of reduced benefits while the insured works in some capacity.

Rider – An addition to the policy that provides additional coverage.

S

Schedule of Benefits and Exclusions – The portion of the policy that outlines what is and what is not covered.

Short Term Disability (STD) – benefits are paid for a limited amount of time, prior to commencement of long term disability coverage. 

Statement of Claim – A document filed with the court by the plaintiff and served on the defendant that outlines the claims and the facts.

Statement of Defence – A document filed with the court and served on the plaintiff’s lawyer admitting and denying specific portions of the statement of claim.

Statute of Limitations – Legislation that establishes the time limit to start a lawsuit.  In Ontario, the limitation period for long term disability claims is two years from the date of denial.

Surveillance – Covert investigations conducted by a licenced private investigator to determine someone’s level of activity.  Used by insurance companies to try to discredit the level of function reported by their insured.

T

Total Disability – A defined term in the policy to be eligible for disability benefits.  Most group policies contain two definitions of disability “own occupation” and “any occupation”.

Transferable Skills Analysis (TSA) – An assessment of an individual’s skillset to determine what other similar, related, or new jobs the person may be able to do following injury or disability.

U

Underwriter – a professional who evaluates risks and determines appropriate premiums and benefit coverage having regard to that risk.

W

Waiver of Premium – While long term disability benefits are paid, no further disability premium payments are required.

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