Non-Evidence Maximum (NEM): How It Limits Group Benefits and How to Calculate the Gap

If you have a group benefits plan through your Canadian employer, you might assume you automatically receive all the coverage outlined in your benefits booklet. However, if you are a higher earner, you may run into a contract limit called the Non-Evidence Maximum (NEM). It caps the coverage an insurer will issue without medical evidence of good health, most frequently applied to group life insurance, AD&D, short- and long-term disability, and critical illness insurance.

If your income rises past this threshold, you create an invisible coverage gap. Calculating this gap requires comparing your promised benefit amount to the policy’s NEM limit, so you can take the necessary steps to secure the full financial protection available to you and your family.

What is a Non-Evidence Maximum (NEM)?

A Non-Evidence Maximum (NEM) is the highest amount of group insurance coverage your carrier will approve without requiring you to provide medical evidence of your health. When you join a group benefits plan, your insurance provider pre-approves a specific level of coverage. You receive this protection the moment you become eligible, with no health questionnaires or medical testing required.

Note that NEM coverage is not the same as unconditional coverage. You must still meet the plan’s eligibility rules, waiting period, enrolment rules, actively-at-work requirement, employee class rules, and the terms of the group contract.

How is a NEM Different From an Overall Maximum?

It is important not to confuse the NEM with your plan’s overall maximum, which is the absolute highest amount of coverage the plan will provide. The NEM is typically set below the overall maximum, and the gap between your NEM and the overall maximum is known as excess coverage. It is available only after the insurance carrier reviews your health information and approves the additional amount.

Your employer chooses the benefit types and the overall maximum, but the carrier determines what portion of that coverage can be issued without medical evidence. This also means the NEM for your plan can change at renewal or when your employer switches carriers, which can directly affect how much of your coverage is guaranteed without a health review. The following sections will detail how the NEM impacts your specific plan.

Which Group Benefits are Affected by NEMs?

Non-Evidence Maximums most commonly apply to Life, AD&D, Long-Term Disability, Short-Term Disability, and Critical Illness benefits, each with its own separate NEM threshold.

Here is how a NEM directly limits your major group benefits:

Group Life Insurance

Group life insurance provides a lump sum payment to your beneficiaries to replace your lost income and cover debts like a mortgage. It is usually calculated as a multiple of your annual salary (e.g. 2x). The Non-Evidence Maximum places a hard dollar limit on the death benefit paid to your family without medical underwriting.

Accidental Death and Dismemberment (AD&D)

AD&D provides a benefit if you die or suffer a serious injury as a result of an accident, and the coverage amount often follows a similar structure to group life insurance, based on a salary multiple. Because life and AD&D are frequently linked in plan design, their NEMs may be set at the same level, although the carrier can assign different NEMs to each.

Long-Term Disability (LTD)

Long-Term Disability (LTD) is designed to replace a portion of your income if you become disabled and cannot work for an extended period. The NEM caps your maximum monthly payout. If your income entitles you to $6,000 a month in disability, but your plan’s Non-Evidence Maximum is capped at $4,500, ignoring the NEM costs you $1,500 every single month you are disabled. Over a multi-year disability, this gap can completely derail your financial stability and ability to cover household bills.

Note on tax treatment: If the employer pays the LTD premiums, the benefit payout is taxable. A taxable $5,000 NEM limit means the disabled employee will actually take home significantly less after taxes, making the need to apply for excess coverage even more urgent.

Short-Term Disability (STD)

Because Short-Term Disability (STD) covers a portion of your earnings during the initial weeks of a disability, it is typically measured and paid out as a percentage of weekly earnings. It helps cover everyday expenses until longer-term coverage takes effect.

The Non-Evidence Maximum for STD is expressed as a weekly dollar cap on the amount approved automatically. Just like LTD, the taxability depends on who pays the premiums.

Critical Illness Insurance

The Non-Evidence Maximum for critical illness sets a ceiling on the tax-free lump sum an employee receives upon diagnosis of a covered condition, such as cancer, heart attack, or stroke, without a health review. For example, the plan might allow up to $100,000 in coverage, but the NEM dictates that anything above $25,000 requires medical underwriting.

Below is a summary of how the NEM applies across the five major group benefits:

Not every group benefits plan includes all five of these benefits. The NEM applies only to the specific benefits your employer has selected for the plan. Your plan booklet will confirm which benefits are included in your coverage and whether each one is subject to an NEM.

How to Calculate If Your Coverage Exceeds the NEMs

To find out if your salary-based benefit calculation exceeds the NEM amount, you need two numbers: your benefit formula and the Non-Evidence Maximum for that specific benefit.

First, find the specific formula for the benefit you are calculating in your benefits booklet or member portal and apply it to your income. For example:

• For Long-Term Disability (LTD): Multiply monthly eligible earnings by the coverage percentage (e.g., 66.67%).
• For Life/AD&D: Multiply eligible earnings by the plan’s factor (e.g., 2x or 3x salary).

The next step is to compare your calculated total to the Non-Evidence Maximum listed in your booklet.

Your coverage gap = Calculated Benefit – NEM Limit

If the result is zero or negative, you are fully covered without a medical review. If the result is a positive number, that is your excess coverage.

To see how these limits apply to your specific situation, let’s walk through two examples below:

Example 1: Group Life Insurance

Your plan offers life insurance that is equal to 2 times your salary, and the NEM is $200,000.

You earn $150,000, so the formula creates a potential benefit of $300,000.

If you do not secure the excess coverage, your family will only receive the guaranteed $200,000, leaving a $100,000 shortfall.

Example 2: Long-Term Disability

The same logic applies to disability benefits, though the formula uses a percentage of earnings rather than a salary multiple.

Suppose you earn $8,000 per month and your plan’s LTD benefit is 66% of your pre-disability earnings. Your calculated monthly benefit would be approximately $5,280.

If the LTD NEM on your plan is $4,500 per month, you have roughly $780 in monthly excess coverage available to apply for. For STD, you would perform the same type of calculation using your weekly earnings and the weekly NEM listed in your plan booklet.

Why Checking Your Benefits against NEM Matters

The primary reason you need to care about your NEM is the massive financial risk of underinsurance. After a salary increase or promotion, your salary-based benefits increase, and your coverage will automatically adjust upward. Once your calculated benefit hits the NEM ceiling, it stops growing, regardless of how much your salary increases.

If you do not take action to apply for the excess coverage above the NEM, you create a coverage gap. If a claim occurs, the insurance carrier will pay out based strictly on the approved NEM limit, regardless of what the salary formula dictates.

In some cases, you might assume you are fully covered because of your job title or salary tier, but your actual payout will be severely capped right when your family relies on it.

Once your eligible coverage exceeds the NEM, the excess amount requires one additional step to secure. If you don’t apply for this excess amount, your coverage will be capped at the NEM, which leaves you significantly underinsured, especially for income-replacement benefits like disability.

Questions to ask HR before assuming you are fully covered:

• If our company changes carriers, what happens to my approved excess coverage?
• What is the NEM for each benefit line in my plan?
• Based on my current salary, does my calculated benefit exceed the NEM for any of these lines?
• If yes, has the EOI process been started, and where do I send the medical sections?
• When will the excess coverage be effective, and when will payroll deductions begin?

How NEM Amounts Vary by Group Size in Canada

In Canada, the dollar amount of your Non-Evidence Maximum often increases with group size. This comes down to a fundamental rule of insurance: the law of large numbers.

In a very small company, a single catastrophic health event represents a massive financial hit to the insurer’s pool for that group. To mitigate this risk, carriers assign lower automatic approval limits to smaller groups. As a company grows and hires more employees, the risk is spread across a wider population, allowing the carrier to safely offer much higher NEM limits without asking for medical evidence.

The following table uses Empire Life’s publicly published guide as an illustrative NEM benchmark by benefit line and group size:

*For groups with current coverage in place; $0 for groups with no prior coverage. Source: Empire Life – No Evidence Maximums and Overall Maximums (GRP-1164-EN). Note that it is not a 2026 industry benchmark. Other Canadian carriers (Sun Life, Canada Life, Manulife, Desjardins, Beneva, Equitable Life, etc.) use their own grids; always confirm the numbers that apply to your specific plan.

How to Apply for Coverage Above the Non-Evidence Maximum (NEM)

To obtain coverage above the NEM, you must complete an Evidence of Insurability (EOI) form. The process may require a medical questionnaire, blood tests or a paramedical exam, depending on the excess amount and the carrier’s requirements.

Here is a typical 5-step process to follow: 

1. You receive a notice from your plan administrator confirming your benefit exceeds the NEM.
2. You complete the EOI medical questionnaire provided by the insurance carrier.
3. You may attend any additional medical tests if the carrier requests.
4. You return the completed documents, often directly to the insurer, as the information is confidential.
5. Finally, the carrier reviews your application and decides to approve or decline the excess coverage.

If the insurer approves the application, coverage increases to the approved amount, effective under the contract rules. If you pay for the benefit, your payroll deductions will increase slightly to cover the new higher premium.

If the carrier determines that insuring you above the NEM is too risky, they will decline your application. In this case, your coverage remains at the NEM amount, and your premiums remain unchanged.

What If You Choose Not to Apply for Excess Coverage?

If you receive the EOI package and decide not to complete it, your insured amount usually remains capped at the NEM. You may be able to apply later, but the carrier can require EOI and may approve, limit, delay, or decline the excess amount based on the rules in force at that time.

HR Responsibilities: Managing NEMs and Avoiding Liability

If an HR administrator forgets to notify an employee about the NEM, they expose the company to significant financial and legal risks. To protect both the employees and the organization, HR must execute a strict protocol of proactive monitoring, immediate notification, thorough documentation, and carrier switch management.

Below are the 4 key responsibilities for HR:

Proactive Monitoring: HR must not wait for the insurance carrier to flag an issue. Payroll systems and HRIS platforms must be configured to automatically trigger an alert whenever an employee’s salary increase or promotion pushes their calculated benefit above the current NEM ceiling.

Immediate Notification: When an employee reaches the NEM threshold, HR must officially inform them about the coverage gap and provide the Evidence of Insurability (EOI) application package.

Securing Documented Waivers: An employer’s liability does not disappear simply because an employee ignored the paperwork. If an employee refuses to complete the EOI (often to avoid disclosing medical history), HR should document that the employee was informed of the potential uninsured excess amount and was given the carrier’s application instructions. Use a signed acknowledgement or documented communication where appropriate.

Auditing Carrier Transitions: When the company switches providers, HR needs to check and submit a clear list of all employees who previously had approved excess coverage. This action ensures the new carrier follows grandfathering rules, so employees do not have to take new medical exams.

Case Study: The $18,000 Annual Oversight

To understand the serious implications of ignoring the Non-Evidence Maximum, take a look at the following scenario involving a mid-sized Canadian technology firm.

Natalie, a senior director, received a significant promotion, raising her annual salary from $120,000 to $180,000. The company’s Long-Term Disability (LTD) plan covers 66.67% of monthly earnings, subject to a $6,000/month NEM limit.

Based on her new salary, Natalie was eligible for $10,000 a month in LTD benefits. However, the HR department’s payroll system didn’t alert the benefits administrator that Natalie had exceeded the $6,000 limit. Because of this, Natalie was never informed and didn’t submit an EOI form.

The Event: Eight months later, Natalie suffered a severe back injury and needed a long medical leave

The Outcome & Liability: When the insurance company approved her claim, they followed the contract and limited her payments to $6,000 per month. Natalie faced a $4,000 monthly shortfall ($48,000/year) compared to what she expected.

The carrier followed the contract and was not at fault. However, the HR department did not fulfill its duty to inform Natalie about the NEM gap when she got promoted. As a result, Natalie hired a lawyer to sue her employer for negligence.

This situation shows how a small mistake led to a large financial loss for the employee and significant legal issues for the employer. That’s why tracking NEM limits is an essential responsibility for the employer.

Quick Compliance Checklist for HR

• Run a payroll vs. benefits volume audit bi-annually.
• Configure automated system alerts in your HRIS/Payroll platform to flag when an employee’s salary multiple crosses the current plan NEM.
• Secure a physically or digitally signed waiver if an employee officially declines to complete an EOI package, thereby protecting the organization from future liability.

FAQs about Non-Evidence Maximum in Group Benefits

Do I have to pay for the medical tests required for excess coverage?

If the insurer asks for medical tests, ask the insurer or plan administrator who pays for them before booking the appointment. Cost responsibility can depend on the carrier and the type of evidence requested.

What happens to my approved excess coverage if I switch employers?

Approved excess coverage does not transfer with you when you change jobs. When you start with a new employer, you will be subject to their specific group benefits plan, including their unique NEM limits, and you will need to reapply if your new salary exceeds those limits.

Are NEM limits the same for every employee in my company?

The NEM dollar limit is generally the same for everyone within a specific employee class or group. However, whether an individual actually hits that limit depends entirely on their personal salary.

What happens if I get a raise but forget to submit an EOI?

Your coverage will be locked and capped strictly at the plan’s NEM limit. Even if payroll deductions are mistakenly taken for a higher amount, the insurance carrier is only legally bound to pay out up to the uncontradicted NEM limit if a claim occurs before EOI approval.

Can the insurance company cancel my current coverage if they decline my EOI?

No. If the carrier declines your EOI application due to an uncovered pre-existing condition, they are only refusing to insure the excess layer of risk. Your foundational coverage up to the NEM threshold is fully guaranteed and cannot be cancelled or modified as long as you remain an eligible employee.