The top disability insurance providers in Canada

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One in three Canadians will suffer a serious injury or illness that prevents them from working for at least three months during their working years. 

What would happen if that were you? Could you keep paying your bills?

Disability insurance offers peace of mind and a regular income if you get ill or suffer a life-changing accident. 

This guide explains how disability insurance works in Canada. Learn what is covered, why you should consider purchasing it and who offers the best disability insurance plans.  

What is disability insurance?

In Canada, disability insurance is a type of insurance that protects your income if an illness or injury keeps you from working. In essence, it ensures your earning potential. 

Short-term and long-term disability insurance are both available. 

Employers frequently offer short-term disability insurance as an employee benefit. It is limited to just a few months of coverage. Long-term disability insurance is available to purchase individually. It protects your earning potential until retirement age. 

For both short-term and long-term insurance, there is some public disability assistance in Canada. These are the Employment Insurance (EI) and the Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) respectively. These important programs help many people, but they are not always enough. 

For example, the public CPP/QPP assistance pays an average of $619.75 per month. That is not enough to live on. 

You can protect yourself and your dependents by supplementing public programs with additional long-term disability insurance. The most generous plans can cover you for up to 85% of your previous pre-tax monthly income. 

How does disability insurance work?

Disability insurance works like other insurances. Risk is spread over a large number of policyholders. Some unlucky people will have a need, but most will not. Everyone pays a small amount in order to be protected. A serious injury or critical illness can end a career. The main benefits of disability insurance are peace of mind and the financial safety net it offers. 

When a worker first stops working, short-term disability insurance will take over. This is just a lifeline to temporarily hold the worker over financially until they can return to work. It lasts up to 6 months. Many employers offer it as a benefit. You can purchase it individually if you are self-employed, do not have short-term disability insurance available to you through work or require additional coverage. 

After short-term disability ends, someone who is still unable to work may be eligible for long-term disability insurance. It usually only begins after a 3 to the 6-month waiting period. It potentially covers several years of payments until the worker can return to work. 

In some cases, long-term disability insurance can provide a monthly income until retirement! Always check the fine print before buying any policy.

What does short-term disability insurance cover?

The Canadian government offers Employment Insurance (EI) benefits to workers suffering from medical issues that prevent them from working. It lasts up to 15 weeks and pays 55% of previous earnings, up to a maximum of $595 per week. 

Employment taxes fund this program. Eligible recipients include the recently unemployed, those taking parental leave and those unable to work due to medical reasons.

Workers seeking EI due to disability are required to obtain a medical certificate to explain their illness, injury or condition.

Private plans, offered through an employer, are designed specifically for workers missing time to illness or injury. Employment Insurance benefits are general. These private plans target temporarily disabled workers. As such, they may be more generous.

Check with your employer to learn if you are covered by Canada’s Employment Insurance (EI) benefits or a private short-term disability insurance plan.

What does long-term disability insurance cover?

Long-term disability insurance covers between 40 and 85% of your previous monthly pre-tax income. High earners should note that payments may have a cap of $5,000 per month. As always, coverage amounts depend on the insurance plan. 

In the event of a catastrophic need, disability insurance makes sure that you and your family will be okay. You will still be able to cover major bills, medical care and day-to-day living expenses. 

Wondering if long-term disability insurance is worth it? The public CPP and QPP plans offer an average of $619.75 per month. Would that be enough to cover your expenses?

What conditions qualify for disability in Canada?

Insurance companies all have a different definition of disability. Qualifying conditions may change from insurer to insurer and plan to plan. 

These conditions are defined as conditions that would prevent a worker from being able to perform their job. 

Among others, qualifying conditions include:

  • Amyotrophic Lateral Sclerosis (ALS)
  • An accident occurring on the job
  • Cancers
  • Cardiovascular disease and stroke
  • Chronic fatigue syndrome
  • Early-onset Alzheimer's Disease
  • Idiopathic Pulmonary Fibrosis (IPF)/ldiopathic Fibrosing Alveolitis/ldiopathic Interstitial Pneumonia
  • Injuries affecting the body, including the back and the brain
  • Huntington's Chorea Disease
  • Gastrointestinal issues such as Crohn’s disease, irritable bowel syndrome and colitis
  • Loss of hearing
  • Loss of vision
  • Mental health issues, such as anxiety, depression and bipolar disease 
  • Multiple sclerosis
  • Parkinson's Disease
  • Post-traumatic stress disorder
  • Post-inflammatory Pulmonary Fibrosis/Interstitial (Non-idiopathic) Pulmonary Fibrosis
  • Progressive Polyneuropathy
  • Seizures

What is the best disability insurance in Canada?

Which disability insurance provider and policy is best for you depends on your needs, your age, health and ability to pay.

Here are some commonly searched life insurance providers in Canada:

How much does disability insurance cost?

Disability insurance typically costs between 1-3% of your monthly salary, though it can range as high as 9%.

Your premiums depend on coverage amount and length. The waiting period for the insurance to kick in after an illness or injury, your age, current health and occupation are also taken into account. 

As everyone has different needs, check with insurers and compare quotes. 

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How much disability insurance do I need?

There is no hard rule on how to calculate how much disability insurance you need. It depends on your family situation and your risk profile. You will need to consider your monthly spending and anticipated needs. Note that many plans have a waiting period before they kick in.

Here are some good questions to ask yourself when considering disability insurance:

  • Do you have existing short-term disability insurance through an employer? 
  • Do you have dependents? You may have children, a spouse, parents or siblings you support financially.  
  • Are you a single parent?
  • How much do you still owe on your mortgage? 
  • Do you have a car loan, credit card or other debts to service?
  • Could you and your family stay in your house without your salary?
  • How much money do you have saved?

There are two types of long-term disability insurance available. You may purchase either any occupation or own occupation disability insurance. The former is less expensive, but you can lose benefits if you are able to do a different job. The latter is more expensive, but it protects your earning potential if you can no longer do the job you do today. This makes sense for high-salary or specialized workers. 

!If you have any occupation disability insurance, you may lose benefits if you are well enough to do a different job. For example, mobility issues may mean you can no longer work a physical factory job but may be apt to perform an office or service job from a seated position. 

How do I get short-term disability insurance?

Short-term disability insurance is usually offered through an employer. Self-employed people can speak with an insurance broker about a plan or purchase a plan online. 

In Canada's public system, the government offers Employment Insurance (EI) benefits to workers with medical issues that prevent them from working. Workers must obtain a medical certificate explaining their qualifying illness, injury or condition. It lasts up to 15 weeks while paying 55% of previous earnings (up to a maximum of $595 per week). 

How can I get long-term disability insurance?

Long-term disability insurance can be purchased online, directly through an insurer or through an insurance broker. Quickly compare rates and options with our comparison tool

It is a smart idea to purchase long-term disability insurance. It ensures your ability to cover major bills and day-to-day living expenses even if you are unable to work.

Long-term disability is affordable protection. Here is what a leading provider quotes for different profiles:

Age of insuree Monthly salary insuredMonthly premium
30$2,500$37
30$5,000$70
50$2,500$69
50$5,000$132
Disability insurance premiums by age and amount

Are disability insurance premiums tax-deductible in Canada?

Unfortunately, disability insurance premiums are not typically tax-deductible in Canada. 

We recommend speaking with a tax professional if you feel that you may qualify for a tax deduction. Taxes are a complex topic. The specifics can change dramatically between individuals.

While disability insurance premiums are not tax-deductible, the disability tax credit reduces the income tax of people with a disability. 

Note, should you ever need them, the payments provided by disability insurance are tax-free. 

Can I purchase disability insurance if I am self-employed in Canada?

Yes, the self-employed can purchase both short-term and long-term disability insurance.

Disability insurance is crucial for freelancers and entrepreneurs. If you are unable to work, you are unable to earn. You may also have recurring business expenses that you need to keep paying even while you are away. 

For short-term disability needs, self-employed people have the same right to apply for Employment Insurance (EI) as any other worker. Those that need the additional protection of a short-term plan can purchase a plan online or speak with an insurance broker. 

For long-term disability insurance, the self-employed can purchase plans just like the employed. Speak with an insurance broker, speak directly with insurers by clicking on the link below:

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