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Disability Insurance Canada

There are many different reasons why people may need to take time off from work, and sometimes that time is not covered by sick or vacation days. This is where disability insurance comes in.

Disability insurance is an income replacement policy that aims to protect your financial well-being in case you are unable to work due to illness or injury. It aims to replace a portion of you’re income while can’t work actively to earn a living.

A disability insurance policy is a type of insurance that provides income in case you are unable to work due to illness or injury. This type of insurance aims to replace around 67% of your monthly income while you cannot work actively and earn money.

Why Should You Get Disability Insurance?

Disability insurance is an important step in managing your financial risks because we live in a world where you don’t get paid if you can’t work.

If you’re on the fence and are researching as to whether or not you need disability insurance, the best way to evaluate whether you need it or not is to look at your monthly living expenses and compute how many months (or years) you can support yourself and family without an active income.

If you suddenly find yourself incapacitated and unable to work, how long can you last without receiving a paycheck? If the answer is less than 6 months, then you need disability insurance.

injured lady with neck brace

What Does Disability Insurance Protect You From?

Aside from the obvious, disability insurance actually protect your wealth and from insolvency. If you can’t work due to an injury or illness, the tendency is to withdraw from your savings, investments, retirement plans, or liquidate assets such as real estate or businesses if any.

Disability insurance prevents you from dipping into your retirement funds, or worse, going into debt to support your cost of living and other financial obligations.

If all of a sudden you find yourself in a situation when you can’t work for a living, it doesn’t mean that your bills and other recurring payments actually stop. Whatever institution that collects money from you will continue collecting what’s due even if you can’t work.

How Does Disability Insurance Work?

Aside from the obvious, disability insurance actually protect your wealth and from insolvency. If you can’t work due to an injury or illness, the tendency is to withdraw from your savings, investments, retirement plans, or liquidate assets such as real estate or businesses if any.

Disability insurance prevents you from dipping into your retirement funds, or worse, going into debt to support your cost of living and other financial obligations.

If all of a sudden you find yourself in a situation when you can’t work for a living, it doesn’t mean that your bills and other recurring payments actually stop. Whatever institution that collects money from you will continue collecting what’s due even if you can’t work.

When you implement disability insurance coverage, you pay a monthly premium to maintain the coverage in force. If you can’t work, your disability insurance will pay a portion of your lost income on a monthly basis until you’re either back at work or the length of the benefit period has been met.

Most group disability insurance policies provide coverage up to 2-years, especially for “regular occupation”; if you’re deemed fit to work any other job even if it’s not related to your profession, education, background, or experience, your coverage stops.

What Types of Disability Insurance Policies Are Available in Canada

There are two main types of disability insurance in Canada, and they are as follows:

  1. Short Term Disability Insurance
  2. Long Term Disability Insurance

Short Term Disability Insurance

Short Term Disability Insurance policies provide short-term income protection. Most group insurance plans have short-term coverage built-in. If you have short-term insurance coverage at work, one thing you have to look out for is how long the elimination or waiting period is. This is important because say your group plan has a waiting period of 90-days, you may find yourself in a situation where you have a short-term disability and without income for 90-days.

Depending on your situation and where you’re injured, you may be able to claim employment insurance or WCB but of course, why risk it?

It’s better if your short-term disability insurance has a shorter waiting period, so if you can’t claim from EI or WCB, you know that you have income while you’re recovering from a short-term disability.

Long Term Disability Insurance Coverage

Long-term disability insurance is different from short-term disability insurance because it provides a source of income for a longer amount of time of between two years and age 65.

Whenever I plan for disability insurance, I prefer giving the client a policy that provides disability benefits to age 65 on a regular occupation definition. In the case of permanent disability, there’s no guesswork because you won’t find yourself in a situation where your benefits stop because you’re considered to be able to perform any other jobs even if you can’t work your regular occupation.

What Should I Consider When Buying Disability Insurance?

soft tissue injury - wrist

The number one thing that you should consider when buying disability insurance is if whether or not you can qualify. To qualify, you should be in good health and can work at least 20-hours a week. Sometimes people realize the need for insurance coverage a tad bit too late because either they’re already sick or already injured.

Keep in mind that you should always get an umbrella before it rains so as to protect yourself from getting wet from the rain.

Disability insurance can be confusing because there are various types of definitions, clauses, and occupation classes.

Most clients I talk to don’t consider getting individual disability insurance citing that they’re already “covered at work”. If you have a group plan, it doesn’t automatically mean that you have disability coverage, and even if you have disability coverage, I suggest that you read your group benefits manual and look for the words: “regular occupation”, “any occupation”, and “cancellable”.

First, you should have long-term regular occupation coverage, ideally up to retirement age, so you don’t need to force yourself back into the workforce even if you’re still dealing with a disability.

Most group policies would only cover between 1 – 2 years for regular occupation, afterward, it switches to “any occupation”.

Any Occupation

The disability insurance definition for “any occupation” states that you will only receive benefits from your disability insurance policy if the injury or illness stops you from working any occupation that you are reasonably qualified for based on your education or experience.


Ideally, your disability insurance should be non-cancellable. This means the insurance company can not cancel, increase the premiums, or reduce benefits for the life of the policy or coverage period, allowing you to keep your coverage after you make a claim.


Cancellable, on the other hand, allows the insurance company to make changes to an already existing policy, especially after you make a claim.

Group vs Individual Disability Insurance

man suffering from backpain

Group Disability Insurance

A group disability plan is typically provided by an employer. As mentioned, most Canadians refrain from getting individual disability insurance because they think that they’re well covered at work.

While some companies would really look after the benefits of their employees, most would only provide you with the most cost-effective group plan that’s why it’s very important to read your benefits manual and look for the definitions mentioned in previous sections of this article.

Individual Disability Insurance

Individual disability insurance is available to all adult Canadians who would like to get solid disability insurance protection, especially in case of a prolonged injury, incapacity, or illness.

You have better control of your disability insurance coverage with an individual plan compared to a group plan because you’re the major decision-maker, not your company or its management.

It’s worth mentioning, however, that some benefits may not be available to you depending on your occupation class. If you want to take a look at what kind of benefit your occupation class can get, you can book a quick appointment with us here, and we’ll help you plan solid individual disability insurance that you can qualify for.

Is Disability Insurance Right for You?

If you need to go out there and work (even just to your home office) to make a living, you need disability insurance. If you have income even if you’re not actively working, you need not implement disability insurance.

Most Canadians actually need disability insurance, some have some sort of coverage through work but is usually not enough.

If your income has the tendency to stop if you can’t work actively, then you should definitely get disability insurance coverage.

Which type and how long, will have to depend on your preference, need, and budget. Ideally, you should have coverage up to age 65, so you need not worry about when the next paycheck is going to come or be forced to work other jobs you don’t know anything about because your coverage stopped.

How To Apply For A Policy

sick patient

You can apply for a disability insurance policy through financial security advisors like us, some people call us insurance agents or brokers but our main function is to help you manage your financial risks and build wealth through passive investing.

Book a discovery appointment here, if you need help planning your disability insurance.

To process your application, we’ll need to start with filling out the application form. We can meet online to do this but first, we’ll have to determine how much income you’re looking to protect, your risk based on your lifestyle, health, and occupation, and how much you can qualify for.

This is all done through an in-person meeting or web conferencing. We’ll interview you and you answer the questions. Afterwhich, we both sign the application form.

We will also have to ask for your financial information to completely fill out the application form, and this is all confidential.

To apply, please click here to book an appointment with us!

Why Should You Get Individual Disability Insurance?

The main purpose of disability insurance is to protect you against financial burdens by providing income when you can’t work.

Should you find yourself unable to work for money, will your income continue? If your answer to this question is “NO”, then you need disability insurance.

This is perhaps the strongest reason why you should get individual disability insurance, especially a long-term one!

How Much Is Disability Insurance In Canada?

how much does it cost

The cost of disability insurance in Canada depends on how much coverage you require, the type of policy, and how long you wish to receive benefits. Another important factor that affects your disability insurance premium is the waiting or elimination period.

If you’re employed and have some sort of short-term disability insurance from work or would qualify for EI, extend your elimination period to 90 days since there’s going to be coordination of benefits anyway, government and group benefits will always payout first. Self-employed should have a shorter waiting period so they can start receiving benefits fast.

This question is quite difficult to answer with an actual value because, by the time you’ve read this article, rates would have increased already. Also, disability insurance premiums as well as what type of policy you can qualify for differing from one occupation class to the next.

The best way to learn how much your disability premiums will be is to request a personalized disability insurance quote, based on your specific situation. As mentioned, disability insurance is quite tricky and we don’t really suggest getting one online without talking with an advisor because there are many types of disability insurance policies. Most online-only disability insurance applications are for the most basic of coverage, which only covers regular occupation for 3-years, and the quote that you may receive with instant quoting systems will only be for injury coverage.

When you have an advisor guiding you in planning your disability insurance coverage, you can decide to only get the basic affordability concerns or get the best coverage if the budget is of no concern.

Book a Disability Insurance Consultation

Book an appointment with us here for a non-obligatory, and no-pressure consultation.

Book an appointment here.

What Conditions Qualify for Disability In Canada?

Depending on the type of coverage you have in your disability insurance policy, you can claim for either injury or any type of illness that prevents you from doing what you do to earn a living. This goes without saying of course, that your doctor agrees with you.

Since everyone has their own judgment of what is considered ‘injury’; a doctor’s statement certifying that you are indeed unfit to work supports a valid claim. In addition to this, it’s also required that you are under the care of a physician.

cancer patient

How long does Disability Insurance Benefit last?

The term of your disability insurance policy may vary depending on the type of plan you choose, but some policies offer monthly benefits for up to two years or until the age of retirement (depending on your chosen coverage at the time of application). Long-term individual policies typically offer benefits for up to five years or until the age of retirement.

Plan premiums for disability insurance generally increase with age because older applicants have a higher risk of being unable to work due to illness or injury. That’s why it’s wiser to apply for coverage while you’re younger so you can lock in your rates with a non-cancellable policy.

I personally suggest that you get coverage that provides regular occupation benefits of up to age 65 to hedge against the possibility of having a permanent disability.

Short-Term vs Long-Term disability insurance

Short-term disability insurance benefits typically last up to 6 months with some lasting up to 1-year while you’re recovering and are unable to work. Most group policies have short-term disability coverage, and if you’re looking for more robust coverage, you should get an individual long-term disability coverage that continues your benefit period in case of prolonged injury.

short term vs long term

How much Disability Insurance do I need?

You can get $10,000.00 a month of disability benefit, of course, if that’s around 67% of your active income and you actually don’t mind fielding the premiums for such a high coverage amount.

Seriously though, you can typically qualify for up to 67% of your annual income. So, say you’re earning $5,000.00 a month, you could qualify for up to $3,350.00 of monthly disability benefits.

Is Disability Insurance Taxable in Canada?

Individual disability insurance benefits are generally non-taxable since you’ve paid the premium with after-tax dollars. If your business paid for your premiums and claimed on as business expenses, your benefits may be subject to tax. For employees who are covered with group disability insurance where their employers paid for the premiums either in part or in full, disability insurance proceeds are taxable, since the portion of the premium that your employer paid was claimed as business expenses in the company’s tax filing.

The Best Disability Insurance You Can Get in Canada

The best disability insurance in Canada is one that protects your income against both injury and illness.

Note that the illness definition within the realm of a disability insurance policy does not refer to a life-threatening illness that is covered by critical illness insurance. The illness coverage in a disability insurance policy could be a serious illness but it can also be any illness that prevents you from actively working for income.

If you’re looking to implement the best disability insurance you can get in Canada, you have to pay special attention to the “regular occupation” benefit. Most group disability insurance plans would only cover employees between 1 to 2 years for regular occupation, afterwhich, you’ll only be covered with “any occupation”. This means that if you can work any other type of work, your benefits stop.

The best disability insurance provides long-term regular occupation coverage, ideally up to age 65, in case you would ever have to deal with a permanent disability.

The best of the best, however, would continue paying benefits even if you’re working another job based on the “own occupation” definition but not everyone would qualify for this policy. If you’re a doctor, lawyer or someone who a professional designation (i.e., letters after your name, like MD, CPA, etc), you may qualify for this type of coverage.

Is Disability Insurance Worth It In Canada?

It’s never a bad idea to have disability insurance for life’s worst moments such as a prolonged injury or illness that makes earning a living impossible.

Sometimes, we tend to take our ability to earn a living for granted. Once you understand the benefits of having insurance coverage, you can’t stop to wonder as to why most people would insure anything and everything except themselves or their ability to earn a living.

Getting an insurance protection policy such as disability insurance is an important part of a well-rounded financial plan. Most people only think about investments when they think of financial plans; disability insurance is as important as any financial risk management plan.

Everything else you pay for will keep on drawing funds from your account whether or not you’re able to work for a living.

Some people say that insurance, in general, is only worth it if you make a claim, and it isn’t if you won’t claim anyway but how would you know if you would need to file a claim down the road?

What if you find yourself needing to make a claim but there’s nothing to claim because you didn’t get disability insurance? That’s a risk right there, a type of risk that is actually manageable if proper planning was implemented before the need would ever arise.

As a financial security advisor, I would say that it’s worth it, we pay for everything else, why not pay for something that will pay you back if you can’t work to pay for other things you’re already paying for?

is it worth it

Apply for Disability Insurance

In the event of a permanent disability or serious injury, disability insurance can help protect your household’s income.

Short-term disability insurance typically pays benefits for up to one year while long-term coverage will pay benefits for up to age 65 (depending on your preferred coverage length).

The best type of disability insurance is one that protects your family against both injury and illness. This type of coverage will typically pay 67% of your monthly income if you’re unable to work due to illness or injury.

As mentioned earlier, it’s important to have protection in place while you don’t need it yet for you never know when you may need it! As they say, the best way to protect yourself from the rain is to bring an umbrella even if it’s not going to rain!

Please choose a date and time on our scheduling software below for a free disability insurance consultation and we’ll assist you in choosing the best coverage that meets your needs and budget.

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