Don’t cancel LTD for expectant moms

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Expectant mothers sometimes want to discontinue long term disability (LTD) coverage during their maternity leave, says Susan Cranston, assistant vice-president, group small business, marketing & advisor services at Manulife Financial.

"In the majority of cases (if not all), we don't think it's a good idea," she says. "While it might seem like a good financial decision for the plan member at the time, unforeseen future events could have negative consequences in the long run."

According to Cranston, here's what advisors will want to discuss with clients on the topic:

  • Break in coverage:  Discontinuing coverage for a maternity leave is a "break in coverage." This poses a potential problem if, during the maternity leave, the plan member has tests or is treated for a condition that evolves into an illness after she returns to work. If a connection is made between the tests and the illness, coverage could be denied under the pre-existing condition clause.
  • Greater level of coverage: Group benefits provide a greater level of coverage (income replacement). If the plan member became sick or injured during the maternity leave, provincial Employment Insurance coverage would only provide coverage for 15 weeks (after a two week waiting period). Following that, the plan member would have no income. The provincial plan generally pays less at (50 or 55%) than a group LTD plan.  Just to be more clear: if the plan member became sick or injured during the maternity leave and did not opt out of coverages she may be eligible for LTD benefits as of her scheduled return to work (RTW) date.
  • Qualifying period: The plan member could satisfy a portion or all of the qualifying period during the remainder of her maternity leave, and if eligible, based on all other contract provisions, benefits could begin as of her scheduled RTW date. If she does opt out she will only have whatever benefits are available to her through the provincial employment insurance program which is often a very limited time period.
  • Possible waiting period: Also, although very rare, a plan member might need to go through a waiting period after returning from the maternity leave. Rare, but still something that must be considered when a plan member is considering a decision like this. This used to be more rare when a maternity leave averaged six months or less as many contracts do not require a new waiting period be satisfied as long as the absence is not more than six months and premiums continue to be paid. The employee would still be considered an active employee for benefit purposes. Now that a maternity leave can be up to one year the employee may find she needs to satisfy a new waiting period depending on contract wording.

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