When an employee goes on an approved Long Term Disability (LTD) leave, it is usual that the insurer no longer charge the employer a premium for the LTD coverage for the employee on leave. This is called premium waiver and should be done automatically. However, the waiver applies not only to the LTD premium but to all the insured benefits regardless of which insurer covers these benefits.
Waiver of Premium
The reasoning for waiver of premium is that once a disabled employee is off work, they won’t run the risk of losing life product coverage if the employer changes plans or cancels benefits, for whatever reason. Insurance companies will not want to take on a known risk, such as an employee on disability leave, so the existing carrier retains the risk at no cost to the employer. This applies only to the insured benefits such as Life, Dependent Life, Accidental Death and Dismemberment and some group Critical Illness plans.
In some cases, the LTD is carried by a different insurer than the rest of the life products. Waiver can still apply. This is important as often it is missed, which can put the employee at risk of losing coverage. Another scenario applies when an employer does not have an LTD plan, the employee does not qualify for the LTD benefit due, for example, to a pre-existing condition or is receiving WSIB. Waiver criteria is generally defined by the life policy, not the LTD. This means that an employee on a long term or permanent sick leave can qualify for life waiver whether there is an LTD policy in place or not, for as long as they meet waiver criteria.
Whenever an employee goes on a long term or permanent sick leave, a waiver of premium should be applied for, unless the insurer has proactively triggered it already. The standard waiting period for waiver is six months from last day worked so the application should be made a month or two prior.
Apply for Waiver when an employee:
- goes on Long Term Disability, even if the life coverage is with a different carrier;
- goes on long term WSIB (remember to always apply for LTD, if available); or
- goes on long term sick leave without LTD or WSIB coverage, even if they have been declined for the benefit.
Why?
- To save the premium costs related to the employee on leave;
- To ensure that the employee’s life coverage remains in force whether or not the employee ever returns to the workforce; and
- To ensure that the employee’s life coverage remain in force even if the employer’s plan moves to another carrier or the employer closes.
When an employee goes on a long term sick leave, a plan administrators should consult with their advisor or the insurer to guide them through the waiver application process. For more information, please contact your ASSOCIUM Benefits representative.
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