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If you win CPP disability benefits, you will get a one-time retroactive lump sum payment in addition to ongoing monthly CPP disability payments.
For example, it is common for people to get CPP retroactive payments of ,000 to ,000. If the full amount is applied to your taxes on the year you get it, it is possible you will have a tax bill.
Even worse, you will owe most if not all of the retroactive payment to the insurance company, so this can leave you with no money to pay the taxes owing!
This doesn’t happen often, but can happen if you have other sources of income, or if you have a large retroactive payment for past CPP disability benefits.
In my experience, most people don’t understand how disability insurance policies work.
The first thing to understand about disability insurance policies is that you get what you pay for.
Theoretically, you or your employer could buy a policy that didn’t include the CPP deduction, but it would cost more.
So almost long-term disability insurance policies, allow for a CPP deduction because this clause results in lower monthly premiums.
So after learning all this, you are right to wonder: Why in the world would I apply for CPP disability benefits just to save the insurance company money and create all these other hassles for myself? Even with the potential problems listed above, there are still very good advantages to you in winning CPP disability benefits.
Below I review how CPP payments interact with your disability insurance payments, I review two big problems you will face; and conclude by discussing the six reasons why applying for (and winning) CPP disability is the smart thing to do.