Question: I just got approved for CPP disability and am getting a large CPP disability back pay, for past benefits owing to me. Can my disability insurance company take some or all of this money?
Answer: Yes, in most cases your will have to pay your insurance company some or all of the CPP disability back pay you get from Service Canada.
So, you may be wondering why on earth does the insurance company have a legal right to your CPP disability back pay?
The reason is because insurance companies are given this legal in the fine print of the disability insurance policy. No two insurance polices are exactly alike, so you would need to check your own insurance policy to confirm it gives the insurance company the right to your CPP disability back pay (Hint: All modern disability insurance policies give this right to the insurance company, so it is 99% likely is does in your case.)
If you received disability benefits from the insurance company for the period of time covered by the CPP disability back pay, then you have to pay those benefits back to the insurance company. It is possible your insurance company got you to sign an Irrevocable Direction to Pay Form. If you signed this form (and we strongly advocate that no one ever sign that form), then you won’t have any say in the matter, Service Canada will simply send your CPP disability back pay directly to the insurance company!
There is no fixed amount that you will need to the insurance company, it will depend on many factors, including the exact wording of the insurance policy. You should seek legal advise before making a payment to the insurance company to make sure you don’t pay them more than you have to.
Was it a mistake for you to apply for CPP Disability given that the insurance company will get all of the money? I don’t think so and have discussed 6 reasons why it makes sense for you to win CPP disability, even though the insurance company gets the money.
WARNING: If the insurance company has cut off your disability payments before you got the CPP disability back pay, then legally they may have lost their right to your money. If this applies to you, give us a call toll free at 1-888-303-4880 and we can advise you of your rights.