Misconception #2: Employer-Provided LTD Coverage Is Sufficient
Fictional Conversation (overheard at a bar)
Person A: “I think I’m fine if I ever get sick long-term because my employer’s LTD plan will cover me. They told me it would cover most of my salary.”
Person B: “Yeah, that’s what I was thinking too! I don’t even need to worry about it. I’ll get paid as if I was still working, right?”
Person A: “Exactly. I’m glad they’ve got it all figured out for us.”
How to Overcome:
The misconception here is that employer-provided LTD coverage is always enough to replace full income during a disability. While employer-sponsored LTD plans often replace a portion of your salary (usually between 60-80%), they typically don't replace your entire income. This gap can lead to financial difficulties if you're depending on that coverage alone. Many employees may assume that the benefits they’re receiving through their employer will suffice, but in most cases, they fall short.
To overcome this, employees should carefully review the details of their employer’s LTD plan and consider purchasing additional private coverage to supplement the employer's insurance. This will ensure that they can maintain their standard of living in the event of a disability. It’s also important to check for offsets, which might reduce LTD benefits if the person is receiving other forms of income, such as Workers' Compensation or Social Security Disability.
Technicalities:
In Campbell v. Sun Life Assurance Company of Canada (2018), the court addressed the issue of the limitations of employer-provided LTD plans. The ruling emphasized that while an employer's policy may cover a portion of the claimant's income, it is often insufficient when factoring in taxes or offsets. The claimant was receiving partial benefits, but these were reduced because of other disability payments, leading to financial hardship. The court found that the insurer failed to provide adequate consideration of the claimant’s total income needs, which led to a favorable decision for the claimant.
