What is an ‘Offset’ in Long-Term Disability Claims?
Most group and individual LTD policies allow insurers to deduct (or offset) other benefits from what they owe you. Common offsets include CPP Disability and Workers’ Compensation benefits. Others may include employment income, severance pay, or Section B weekly indemnity benefits from motor vehicle accidents.
Many claimants are surprised to learn they can’t stack multiple benefits. There’s often confusion about who offsets first. While every policy is different, the general rule is that WCB pays first, LTD second. CPP-D is almost always deducted from LTD payments.
This can result in a “zero sum offset,” where you’re entitled to LTD benefits but receive enough from other sources to reduce your LTD benefit to zero. For example: Client A is eligible for $2,500/month in LTD benefits but receives $1,800 from WCB and $800 from CPP-D—totaling $2,600. Because this exceeds the LTD benefit, the LTD payment is offset to zero.
Many people abandon potential LTD claims in a zero-offset situation. This can be a costly mistake if other income sources end and the one-year limitation to sue the LTD insurer has passed. Being approved for LTD—even if you receive no monthly payment due to offsets—can still offer important benefits, such as:
- Pension accrual
- Waiver of pension and insurance premiums
- Continued health and dental benefits
In zero-offset cases, approval is often easier to obtain since the insurer bears little financial risk. Most LTD policies allow deduction of the original CPP-D award, not the annual inflation-adjusted amount.
If the policy states the insurer can deduct CPP Children’s Benefits, they’re allowed to do so. Though challenged in several provinces, these claims have failed. However, some cases show Service Canada requiring insurers to promise not to claw back these benefits. If an insurer agrees, they may be unable to later reverse that promise.
Reach out to our team for a complimentary consult if you have questions about LTD claims.