Did you know that you must request a waiver of premiums for all disability cases, even when the long-term disability (LTD) benefits are not paid by the insurer? Yes, even for CNESST or SAAQ cases! Neglecting this could have costly consequences, including having to pay the life insurance benefit yourself.
Here is why:
Waiver of premium life insurance = more than a stoppage of premiums
Should the member become totally disabled before age 65, the insurer will no longer require the payment of premiums (waiver) but the insurance coverage will continue. Therefore, the waiver not only means that premium payment to the insurer is no longer required, but also that the insurer acknowledges its responsibility with respect to coverage for which the premiums have been waived.
Some important facts
- Waiver of premium life insurance is not granted automatically; the employee must meet the definition of disability under the contract.
- Therefore, the waiver request must be analyzed by the insurer, just like a long-term disability benefit claim.
- Cases where LTD is paid by the insurer: The waiver is usually accepted at the same time as LTD, through the same form.
- Cases where LTD is not paid by the insurer: CNESST, SAAQ, etc…: You still have to complete the waiver form. A copy of the disability claim acceptance by the government agency must also be forwarded to the insurer together with a copy of the first cheque issued.
- The waiver request form is the same as the LTD claim form (one section to be completed by the employer, one section by the employee and one section by the physician).
- For CNESST, SAAQ, etc. cases, the waiver begins either at the date when the first disability benefit payment would have been made if it were payable by the insurer, or after a set number of months (generally 6 months). Read your contract for the specifics of your situation.
What happens if you fail to request the premium waiver?
If no waiver request is made and approved, for instance in the case of an employee disability recognized by the CNESST, all premiums will continue to be charged, and you and your employee will forego savings.
But, the biggest problem occurs in the case of the death of an employee on CNESST (or other):
- If you haven’t changed insurers since the time of disability and the life insurance premium has always been paid, the life insurance benefit should normally be paid. However, some contracts include restrictions (e.g.: death within 12 months following the disability), so the payment is not guaranteed.
- If you have changed insurers since the time of disability, your employee has no life insurance coverage!
A disabled employee remains under the responsibility of the insurer in place when the disability occurred, provided this insurer was notified of the employee’s situation and accepted the responsibility, which is precisely the purpose of the premium waiver request.
If this is not done, the employer could be held responsible and required to pay the life insurance amount payable to the beneficiary.
The same goes for dependent life insurance, which is subject to the same rules as basic life insurance.
Another complication could arise when the CNESST or SAAQ no longer recognizes the disability and terminates the benefits. You would normally ask your long-term disability insurer to assess the disability. However, if you changed insurers in the meantime, your current insurer will refuse to make such a determination if you failed to request a premium waiver life insurance.
Do not hesitate to contact your AGA advisor if you have any questions.
Louise started her career at Blue Cross before working as a Senior Advisor for a large actuarial firm for more than 15 years. Fellow of the Canadian Institute of Actuaries, Louise joined AGA in June 2014. She assumes responsibility for training, provides technical support, and supplies advisory activities for the large business clientele. Louise is also lecturer at l’UQAM.
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