We want to help you understand exactly how the RBC’s “Group / Association Offset amendment (A670)” works.
In this example, you are eligible for and purchase $10,000 of coverage based on your income. However, you also have $5,000 of Group LTD already in place. Because of overlapping coverage, your individual policy is issued with a $5,000 Group Offset. This means that RBC can reduce their individual coverage by up to $5,000 at time of claim to ensure that you are not receiving more than you are entitled to.
First, let’s take a look what happens if you choose to purchase ONLY $5,000 and not overlap the coverage. If you did that, there would be no offset attached to your policy. This means that the $5,000 of coverage is fully guaranteed at time of claim, even if your income has decreased or if your Group LTD coverage increased.
When it comes to the offset, RBC’s wording is to ensure that you still have that same level of guarantee. This means that if you choose to overlap and purchase $10,000 of coverage, RBC is able to reduce that monthly benefit by the lessor of:
- the monthly benefit you are entitled to receive from your Group LTD policy (at time of claim)
- the specified amount within your amendment (in your example, $5,000)
The KEY word is lessor. This means that if you are only entitled to receive $2,000 of Group LTD coverage, you would be entitled to $8,000 of Individual Coverage.
However, if your Group LTD increased to $10,000 – you would still be entitled to $5,000 from your Individual Policy. Yes, this technically means you can receive more at time of claim than when you were working. The reason for this is that RBC wants to ensure that you are receiving the same guarantee that you would have had if you just purchased $5,000 to begin with (without any sort of offset amendment).
These contracts are fully guaranteed based on your Group LTD Coverage and Income at time of application.
In the event of disability, you can request the carrier to review the offset to determine if you are eligible for a higher amount. This is where you hope you have a good broker who understands the contract at time of claim to help you learn your options. It’s usually something you need to request and not always considered by the adjudicator. If your pre-disability income allowed $15,000 of monthly benefit, and your Group LTD was still at $5,000, then you would qualify for the full $10,000 monthly benefit from your individual contract as they will reduce/remove the offset at time of claim. They will not, in any event, increase the offset amount listed on your policy meaning you don’t have to worry about them reducing your coverage. You only have 90 days to request this.
It’s important to note that this offset is typically associated with a 10% discount. It’s important that you notify RBC if you ever lose your Group LTD coverage, otherwise you monthly benefit will be reduced by 10% at time of claim.