Guaranteed Standard Issue

Oct 15, 2012

In the past year have you seen your Long-Term Disability (LTD) rates increase even though your demographics haven’t changed significantly?   Insurance carriers have had to implement increases to compensate for the decade low interest rate environment.   The result is continued escalation on LTD rates throughout Canada.

A solution to minimize these increases is to ‘blend’ individual disability policies with group LTD.   An individual disability policy has a guaranteed premium for the length of the plan (typically to age 65).   Only the group LTD premium would be subject to change on an annual basis based on demographics, claims experience, gender composition and industry classification.  The individual policy would be the base with the group LTD as the ‘top-up’.   In some situations, the employer would be able to provide a higher level of LTD coverage with both the individual and group LTD benefits.

The advantages of this strategy is that an employer can provide an individual disability policy to its employees at a reduced premium, provide an enhanced definition of disability and provide a disability policy that is portable if the employee decides to leave the current company.

From an employer’s perspective, this integration of individual and group LTD provides premium stability for LTD premiums, an enhanced level of protection for its employees and one of the biggest advantages is that the individual policy can be extended beyond age 65 as long as the employee is still actively working.

Insurance carriers do have restrictions to who would qualify for this program based on the industry classification and the number of employees that are eligible.

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