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Long Term Disability Insurance

Nortel screwed over their employees who had Long Term Disabilities, because Nortel was self-insuring. No one came to their rescue either. Their long-term disability insurance did not help. Other companies self-insure, so you need to be careful with your LTD insurance

I have written before about the plight of the folks who were in the Nortel Disability plan (and are now in a dire predicament), but they lost one of their most active advocates in Peter Burns over the weekend. Peter attempted to put a face to the folks affected by the Nortel Disability debacle (because Nortel was self-insured, the disability insurance payouts became simply another group of creditors).

My connection to this story is that I used this insurance, assuming I was protecting my family, when I worked at Nortel. I was lucky that I never had to test the insurance’s usefulness. I know former co-workers now in a much worse financial place because of the January deadline, which cut off these folks from the benefits they thought they were purchasing.

Given that many folks worry about the future and attempt to protect their families with disability insurance, they need to find out how this disability insurance actually works. If it is with your employer and they self-insure, you can quickly end up in the same predicament as the former Nortel employees.

The insurance looked like it was being run by SUN Life. Still, they were simply administrators, and it was Nortel who was paying the bills (which was cheaper for Nortel at the time), but now with Nortel being a bankrupt husk of itself, things are very different. The disability payments got thrown in with the hundreds of millions owed to vendors, customers and partners, and thus were not going to get paid much. As of January the payouts have stopped and now these folks are living on whatever disability income they can get from the Government.


An excellent example of doing the right thing and ending up in a bad place. It is essential to understand who underwrites your disability insurance. If it is your firm, this is a big issue.

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  1. It’s heartbreaking to hear this. I’ve personally known people who worked at Nortel, who lost not only their jobs but their pensions. I can’t imagine losing all that, only to find out that their disability insurance was invalid.

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