Why is an Individual (or private) Disability policy so much more expensive then a Group Disability policy? There are a couple reasons but the one I would like to write about today, are the wordings in the contract and the increased risk with an Individual Disability policy versus a Group Disability policy. There is one Group Insurance Company that has a wording in their contract that is similar to an individual contract without the price tag associated with it. That company is RBC Insurance.
In case you do not know the history of RBC and their disability contract, RBC bought the Long Term Disability (LTD) benefit from UNUM in 2003. UNUM has been in business since 1848 out of the United States. They moved up to Canada in November 1993, and I was one of the first hires for UNUM Canada out of Vancouver. I worked with the US legal team to take an American contract and have it comply with Canadian law.
Most Insurance Companies will have a Rehabilitation Benefit or a Partial Disability benefit during the first 24 months of Long Term Disability. Each Insurance Company is a bit different in their wordings, but normally an Insurance Company will pay for an employee to enter into an approved work Rehabilitation Program or will pay up to 50% of the benefit if an employee returns to work part time within the first 24 months of disability.
RBC is different, they will allow an employee to come back to work on a part time basis until recovery or age 65. During this time they will pay a percentage of the income that is lost due to taking a lessor paying job or working part time.
Disability and Disabled means that due to the same sickness or means the employee:
- is limited from performing the material and substantial duties of his regular occupation due to his sickness or injury; and
- has a 20% or more loss in his indexed monthly earnings due to the same sickness or injury.
If an employee returns to work and is earning 60% of their previous income, under the Proportionate Loss Formula, RBC will pay 40% of the lost income.
The Proportionate Loss Formula is not standard with RBC Insurance, your Broker has to request it.
I understand that this Blog is a bit technical, but once again, that is why you have a Broker who understands what they are selling you. Don’t wait until you have a claim to figure out what your contract says, call Glendinning Insurance Services, Your Resource Specialist now.