If you’re off work because of an illness or injury, it doesn’t take long for the financial strain to hit.
If you find yourself in this kind of situation, the last thing you want is to be blindsided by confusing policies or unanswered questions about your income. Short-term disability (STD) insurance exists to replace part of your income when an injury or an unexpected illness prevents you from working.
This guide will explain the essentials of short-term disability: how it works, who qualifies, how long it lasts, how it’s different from long-term disability, and what happens when disability insurance claims are disputed.
What Qualifies for Short-Term Disability in Canada?
Short-term disability benefits provide income replacement for individuals who are temporarily unable to work due to a medical condition. It’s a private insurance benefit (not to be confused with Employment Insurance (EI) sickness benefits) and is typically offered through employer-sponsored plans or can be purchased individually. The Financial Consumer Agency of Canada provides a foundational overview of disability insurance.
Eligibility for short-term disability benefits depends on the terms of your insurance policy. Generally, STD benefits are available to employees who are temporarily unable to perform their job duties due to a medical issue, including both physical and mental health conditions, such as illnesses, mental health conditions, recovery from surgery, and others.
STD policies vary from workplace to workplace, from insurer to insurer, each with specific eligibility requirements.
Many employers offer disability insurance through group disability coverage plans. In this kind of context, the claims process is managed by the insurer. It isn’t your employer who assesses the claim based on medical documentation and the policy’s criteria.
How Long Is Most Short-Term Disability?
The benefit period for short-term disability coverage varies depending on the plan. Most policies provide income replacement for between 15 and 26 weeks. In some cases, the coverage could extend up to six months. After this period, if you are still unable to return to work, you may need to transition to long-term disability benefits if available.
During the STD benefit period, the insurer expects you to remain under medical care. Periodic updates from your doctor will likely be required to maintain eligibility.
After a short-term disability application is made, benefits are not payable until you surpass the waiting period. Most short-term disability plans have a brief waiting period, usually five to ten days. This means benefits won’t start immediately. Some employees may need to use sick days or vacation time to bridge the gap.
How Much Do Short-Term Disability Benefits Pay?
The amount you receive through short-term disability benefits typically ranges from 50% to 100% of your pre-disability earnings. The exact percentage will depend on your policy’s terms.
Unlike EI sickness benefits, which are capped at a government-set maximum, STD benefits can offer higher income replacement, especially for employees with comprehensive group plans. The payment frequency is often biweekly, similar to a regular paycheque cycle, but this can vary by the policy.
What Is the Difference Between Short-Term and Long-Term Disability?
One of the most common points of confusion is how short-term disability differs from long-term disability. Individuals can receive benefits through each insurance method; it all depends on the duration of their inability to perform their job duties.
Short-term disability coverage is for initial coverage and generally for conditions where recovery is expected within a relatively short time frame. Long-term disability coverage applies when an illness or injury prevents you from working for an extended period, often beyond six months or longer. Long-term claims involve more stringent assessments, different definitions of disability, and typically provide benefits until age 65 if you remain eligible.
Group policies will commonly stagger STD and LTD coverage, meaning your STD benefit will transition to LTD if your recovery takes longer than anticipated.
Do You Need to File an Insurance Claim for Short-Term Disability?
Yes, and this is where many employees hit their first roadblock. To receive short-term disability benefits, you must submit a formal claim to the insurance provider. Many expect this process to be simple. You are unable to work, you have a doctor’s note, and you assume the benefits will follow. But in practice, insurers sometimes delay claims, ask for additional medical records, or challenge whether your condition truly prevents you from working.
How Does Short-Term Disability Relate to EI Sickness Benefits?
While employment insurance (EI) sickness benefits are a federal program providing up to 26 weeks of income replacement, short-term disability is a private insurance benefit, often offering better coverage. In situations where an employee does not have STD coverage through their employer, they may need to rely on EI sickness benefits instead.
One important distinction is that you generally cannot receive both EI sickness benefits and STD benefits simultaneously. However, if your STD claim is delayed or denied, EI may provide a temporary safety net. Once your STD benefits are approved, you’ll be required to report these payments to Service Canada, which may adjust your EI entitlement accordingly.
Who Pays for Short-Term Disability Insurance?
Coverage is typically arranged through an employer’s group disability coverage plan (unless you have a private policy)s. In some cases, the employer pays the full disability premium; in others, the cost is shared with employees. The source of the premium payment can also affect whether benefits are considered taxable income.
For example, if the employer pays the full premium, the STD benefits received are taxable. If the employee pays the premium (after-tax), the benefits are generally tax-free. Check your paystub or policy for further details.
What Happens If Your Short-Term Disability Claim Is Denied?
When claims are delayed or denied, it creates a financial gap at a time when you are already dealing with health issues. You are not earning a paycheque, but the benefits you are entitled to are being withheld. What starts as an insurance claim quickly becomes a legal issue if the insurer is misinterpreting the policy, ignoring medical evidence, or acting in bad faith.
Denied claims are unfortunately common. Your insurance company may dispute whether your condition qualifies, question the sufficiency of medical evidence, or allege that you can perform modified duties.
Are You Facing a Denied STD Claim?
If you have encountered challenges with short-term disability claims, it doesn’t necessarily mean that you won’t be able to claim your benefits. A denied STD claim does not mean the process ends there.
You have the right to appeal the decision through the internal insurer processes, but if the insurer continues to deny rightful benefits, legal action may be necessary. Engaging an employment lawyer experienced in disability insurance claims can be crucial at this stage. At Whitten & Lublin, we guide clients through appeals and, when needed, initiate legal proceedings to ensure their entitlements are protected.
Reach out to us online or call 416-640-2667. Our Toronto employment lawyers will take the time to learn about your situation and offer guidance on the next steps that are available to you.
