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The Role of CPP Disability in Long-Term Financial Planning

CPP disability benefits can be an integral part of your financial security—even if you qualify for disability benefits from other sources, such as private long-term disability (LTD) through your employer. Let’s have a look at the important role CPP disability benefits (CPP-D) play in long-term financial planning.

The importance of CPP disability benefits

The CPP disability claim process has its own unique eligibility criteria, different from the criteria to qualify for LTD disability benefits. What CPP-D and LTD share is that both provide a financial safety net to fall back on if you become seriously ill or injured. Given that, it’s easy to understand why most people assume that you only need to apply for one of the two.

The reality is that you should apply for both CPP disability claim benefits and LTD coverage. You may qualify for both LTD and CPP disability at the same time, providing you with an even stronger safety net and a solid back-up source of income if your LTD insurer decides to terminate your coverage. You will continue to receive CPP disability benefits while you go through the process of appealing the denial of LTD coverage.

Interplay between CPP disability benefits and LTD coverage

While you can be approved to receive both CPP disability benefits and LTD coverage at the same time, you don’t get to keep the full amount from each source. Instead, your LTD benefits are reduced by the amount you receive from CPP-D. For example, if you’re entitled to $3,000 per month for LTD, and then qualify for $1,000 per month for CPP-D, your LTD insurer will take credit for the CPP-D amount, thereafter paying you $2,000 per month. You will still be receiving $3,000 per month, but from two different sources. This is typically referred to as an “offset” or “coordination of benefits” in your LTD policy.

Why should you apply for both if it doesn’t increase your monthly payments?

You may wonder why you would want to apply for both if it doesn’t result in an overall increase in your monthly payments. There are several very good reasons to apply for both LTD and CPP disability benefits.

First and foremost is that your LTD policy likely requires you to make reasonable efforts to obtain any alternative sources of income, including making a CPP disability claim. If there is such a provision in your long-term disability policy, your LTD insurer may have the power to reduce your monthly LTD benefit payments by the estimated CPP-D payment to which you would have been entitled, even if you didn’t apply for it.

You should make a claim for CPP disability benefits even if your LTD policy does not require you to do so. Here are some of the reasons why:

  • When you are approved for CPP disability benefits, it is a recognition by Service Canada that you have a severe and prolonged mental or physical medical condition or terminal medical condition that regularly prevents you from working. It will be tougher for your LTD insurer to deny your claim or cut off your benefits when the Canadian government has accepted your disability claim.

  • As mentioned above, CPP disability benefits provide a valuable source of income if your LTD provider decides to cut you off (e.g., at the 24-month mark when the definition of total disability changes). You will continue to receive CPP disability benefits while appealing the unfair termination of your LTD benefits.

  • The LTD appeal process tends to be lengthy. You may need to bring a lawsuit against your LTD provider to get the coverage you’re entitled to. The appeal process will be less financially stressful if you have CPP disability benefits coming in each month, and moreover, the fact that you were approved for CPP-D can help support your argument that the LTD insurer acted in bad faith by denying your claim or terminating your LTD benefits.  

  • Receiving CPP-D payments can increase CPP retirement benefits. LTD benefit payments are not taxable, so receiving them means you’re making no contributions to the Canada Pension Plan going forward. Conversely, CPP benefits are taxable. You’re continuing to contribute to the CPP fund when you receive CPP-D benefits, which means you could receive a higher CPP retirement pension once you turn 65.

Reach out to a CPP disability lawyer Alberta and Saskatchewan

CPP disability lawyer James Ludwar is here to help if you are looking for legal advice on your CPP disability benefits claim. Mr. Ludwar can help you successfully navigate the CPP disability claim process and guide you through the appeal process if you’ve received an unjust CPP disability claim denial.

CPP disability benefits can give you financial peace of mind. At Ludwar Law Firm, we will help you understand the intricacies of CPP disability claims and appeals to make the most out of the benefits you are entitled to receive. Check out our website to learn more about how we can help you with your CPP disability claim or other disability claims.

Aside from being an experienced CPP disability law firm, we also provide other legal services for matters such as long-term disability claims to clients throughout Alberta and Saskatchewan.

If you’re ready to work with a professional CPP disability law firm, we welcome you to contact us. The first consultation with our CPP disability law firm is free and can be done at your convenience in Calgary, Edmonton, Alberta, Saskatoon, Regina, and Saskatchewan. Request an appointment today.


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