Disability insurance
Replaces part of your income if illness or injury stops you working.
- Paid monthly
- a share of your income while you can’t work
- Fills the gap
- tops up a workplace plan, or stands alone if you’re self-employed
- Yours, not your employer’s
- it stays with you when you change jobs
How a disability benefit works
From disability to first cheque.
Disability insurance pays you a monthly benefit if illness or injury, including a mental health condition, stops you working. You can spend it however you need. Benefits start after the elimination period, a waiting period you choose when you buy the policy.
Illustration only. Elimination periods, benefit amounts and benefit periods depend on the policy.
Who it’s for
Two reasons people buy it.
Self-employed
No workplace plan to fall back on. An individual policy is often your only income protection, and it’s built around what you earn.
On a workplace plan
Group long-term disability usually covers part of your salary, up to a cap, and it’s taxable if your employer pays. An individual policy can top it up, and it stays with you if you leave.
Incorporated? The business can own the policy. Business-owned disability insurance
What you may already have
Where a workplace plan falls short.
Many employers offer long-term disability coverage. It’s a good start, but it often replaces less of your income than people expect.
The cap
The plan pays 67% of salary, but only up to its monthly maximum. Here that’s $5,000, not $6,700.
Taxable
If your employer pays any of the premium, the benefit is taxed, so you keep less than $5,000.
CPP is deducted
Most plans subtract CPP disability from what they pay. It doesn’t add to the total.
| Feature | Workplace plan | Individual policy |
|---|---|---|
| Coverage amount | A set share of salary, up to a cap | Chosen to fit your income, within the insurer’s limits |
| If you change jobs | Usually ends when you leave | Stays with you |
| Tax on benefits | Taxable if your employer pays any of the premium | Tax-free when you pay the premiums personally |
What’s at stake
Your income, added up.
Your ability to earn is usually worth more than your home or your investments, and everything else depends on it. Here’s what $100,000 a year adds up to by 65.
How much you can get
Coverage follows your income.
Insurers cover a share of your income: roughly two-thirds at moderate incomes, falling to about half at higher incomes, up to a monthly maximum. Each insurer sets its own limits, and any group coverage counts toward them.
Your choices
The terms you choose.
A few choices decide how a policy behaves when you claim, and what it costs. We’ll explain each one for your situation.
Own occupation or any occupation
Own occupation pays if you can’t do your own job. Any occupation pays only if you can’t do any job you’re reasonably suited to. Some policies switch from one to the other after two years.
Waiting period
How long you wait before benefits start, often 30, 60, 90 or 120 days. A longer wait lowers the premium.
Benefit period
How long benefits can be paid, for example 2 years, 5 years or to age 65. Longer costs more.
Guaranteed renewable or non-cancellable
Guaranteed renewable means the insurer can’t cancel your policy, but can raise rates for everyone with that policy. Non-cancellable also locks in your premium.
Options you can add
Cost-of-living increases while you’re on claim, the right to buy more coverage as your income grows, and partial benefits if you return to work part-time or earn less.
Can’t qualify for a fully underwritten policy?
Simplified-issue and accident-only plans have fewer or no health questions, with lower limits or narrower coverage.
Cost
What affects the price.
Age and sex
Rates rise with age, and some insurers price men and women differently.
Occupation
Jobs with more physical risk cost more to cover.
Health history
Your health and medical history affect the price, and sometimes what’s covered.
Benefit amount
The more income you cover, the higher the premium.
Waiting period
A shorter wait costs more.
Benefit period
Paying for longer costs more.
Engineers, geoscientists, technicians and technologists: your association gives you access to Engineers Canada Disability Income Protection.
See the planFrequently asked questions
All questionsDoes the Canadian government offer disability coverage?
Some, but it’s limited, and it isn’t built to replace your income:
- EI sickness benefits pay just over half your earnings, up to a weekly maximum, for up to 26 weeks, if you’ve worked enough insured hours. Self-employed people are covered only if they registered for EI special benefits at least 12 months before claiming.
- The CPP disability benefit is only for a long-term condition that stops you working at any job on a regular basis, and only if you contributed in enough recent years.
- The Canada Disability Benefit and provincial disability programs are for people with low incomes.
Most workplace disability plans also subtract CPP disability from what they pay.
What types of disabilities are covered by disability insurance?
Any illness or injury that stops you working, including a mental health condition. Whether a claim is paid depends on two things in your policy:
- its definition of disability, such as own occupation or any occupation;
- its exclusions: the insurer may exclude a condition you already had when you applied.
How do my age and income affect my disability insurance?
Your income sets how much you can get. Insurers cover a share of it, roughly two-thirds at moderate incomes, falling to about half at higher incomes, up to a monthly maximum, and any workplace coverage counts toward that limit. Without earned income, there’s nothing to insure. Your age mainly affects the price, which is higher the older you are when you buy.
What’s the difference between own occupation and any occupation?
They’re two ways a policy can define being disabled. Own occupation pays if you can’t do the main duties of your own job, even if you could work in another one. Any occupation pays only if you can’t do any job you’re reasonably suited to by education, training or experience, which is harder to qualify for.
Some policies use own occupation for the first two years of a claim, then switch to any occupation. Own occupation coverage usually costs more, and it isn’t available for every job. We’ll explain which definition a policy uses and what it would mean for your work.
Can I get disability insurance if I’m self-employed with an irregular income?
Yes. Insurers usually look at your earned income over your recent years, often as an average, using your tax returns or financial statements, so a strong year and a slow one can balance out.
If you’re incorporated, they look at the salary and dividends you take, and some also consider earnings you leave in the business. If you’ve only recently started, or your income has dropped, the amount you qualify for may be lower. Some plans ask fewer questions about income, in exchange for lower limits.
We’ll go through your income history with you before you apply, so you know what to expect.
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Related to disability insurance
- Life insurance Protects the financial security of the people who matter most.
- Critical illness insurance A lump sum if you’re diagnosed with a covered illness, such as cancer.
- Health and dental insurance Coverage for health and dental costs your provincial plan doesn’t pay.
- Business-owned disability insurance Keeps your company going if an owner or key employee is disabled.
A question about your coverage? Ask us.
No obligation. We’ll tell you plainly what we think, including when you already have what you need.