Group disability insurance in Canada:‍ Full 2024 guide

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Did you know that the odds of you being unable to work for at least 1 year due to a disability before you reach retirement age is 25%? And, did you know that the average Canadian aged 35-44 only has $27,151 in liquid savings?

With an average household cost of living for a couple being around $3,500 per month, most households wouldn’t be able to financially survive a year out of work with no income. This is why group disability insurance in Canada is of immense importance and understanding the coverage vital to your financial stability.

This article dives into group disability insurance policies in Canada, how it works, pros, cons, costs, and the best plans. Use our free comparator to compare plans from top providers and get free quotes right here.

Group Disability Insurance: 4 Key Takeaways

  1. Group disability insurance is widely provided as an employee benefit in Canada.
  2. Long-term plans will commonly have an elimination period of 90 days.
  3. Short-term plans will only provide temporary income.
  4. Group benefits are taxable when paid by the employer.

What is group disability insurance in Canada?

Group disability insurance is a plan that provides coverage to a group of individuals such as company employees or a set group of members part of associations and organizations.

If one of the named individuals on the group disability insurance policy can no longer work due to an injury or illness, the insurance will provide that individual with a replacement income.

The replacement income is usually a set percentage of your salary and can be used at your discretion to cover living expenses, financial obligations, or other costs you may incur as part of your disability. Remember that the group disability insurance is often included in your company’s employee benefit package so make sure to ask your HR department for the specifics of your plan.

If you want to explore the best disability insurance plans in Canada, look no further. You can use our free comparator tool below to compare plans from the best providers in the market and even get free quotes based on your unique needs.

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What is long-term vs short-term group disability insurance?

Group disability insurance policies vary between companies and organizations due to specific optional add-ons. However, in and above these extra add-ons, the major differences in group plans lie in the type of policy you receive.

These policies are widely divided into two main category types: group short-term disability insurance (GSTD) and group long-term disability insurance (GLTD).

Each group disability insurance type provides a different level of coverage and the protection is based on the severity and length of the individual’s disability.

Group long-term disability insurance benefits

Long-term group disability insurance provides employees with long-term benefits if they suffer from serious health concerns, leading to extended disability and long periods away from work.

  • Long-term income replacement: GLTD insurance provides the insured individual with a percentage, usually ranging between 50% and 70% of base salaries. This ensures a certain level of financial stability when recovering from prolonged disability.
  • Maximum benefit: Long-term disability coverage usually has a maximum payable benefit range, regardless of your salary.
  • Prolonged coverage period: The typical coverage periods for long-term plans can be 2 years, 5 years, or up to retirement.
  • Elimination period: Group long-term policies usually have a waiting period between when the disability occurs and when the first benefit is paid to the individual. This elimination period can range from 14 days to up to a year, although 90 is usually the norm.
  • Coverage for serious disabilities: GLTD usually provides coverage for more serious disabilities and chronic illnesses that may inhibit someone from completing their normal line of work and in need of significant recovery time.

Group short-term disability insurance benefits

As the name suggests and contrarily to long-term group insurance, short-term group disability insurance policies only provide the insured individual with temporary cover when they cannot work due to disability. It is specifically designed to bridge a short-term gap where the employee has to be off due to minor disabilities.

Short-term group disability insurance policies provide individuals with the following benefits.

  • Temporary income replacement: Short-term group disability insurance provides the insured with benefits for a brief period, ensuring that an individual can meet their immediate financial obligations when recovering from a short-term disability.
  • Immediate benefits: Benefits from a GSTD policy usually start immediately from the day a disability is diagnosed and the individual is unable to work. Some policies, however, do have short waiting periods of up to 15 days.
  • Length of coverage: The disability benefit is usually paid to the insured for a period ranging from a few weeks up to one year, depending on the policy terms.

Supplement Group Disability Insurance

If you don’t think that the monthly benefit would be adequate to cover your financial obligations, speak to your HR about supplemental cover. Some policies allow employees to purchase individual supplements to the group disability insurance, increasing the monthly benefit limit above that which is offered as standard.

What are the best group disability insurance plans in Canada for 2024?

There are several leading providers of group disability insurance in Canada that offer a range of plans and coverage options for companies and organizations. Usually, these policies can be specifically tailored to cover any needs, although the benefits will largely have to fall under the short-term or long-term group disability insurance policy parameters.

A few of the top plans in Canada include:

  • Beneva disability insurance: Offers customizable group plans focusing on income replacement and rehabilitation services.
  • Manulife disability insurance: Provides comprehensive group disability coverage with a focus on early intervention and return-to-work programs.
  • Canada Life disability insurance: Features group plans with flexible options for short and long-term disability, emphasizing employee support and recovery.
  • Sun Life disability insurance: Specializes in group disability plans with tailored solutions and wellness resources, aimed at supporting both physical and mental health.
  • IA Financial Group disability insurance: Offers group disability insurance with a range of coverage levels, focusing on personalized support and rehabilitation services.
  • Empire Life disability insurance: Provides group coverage emphasizing flexible benefit options and support for maintaining workplace productivity.
  • RBC disability insurance: Offers group plans centered on income protection and rehabilitation, with a focus on sustainable return to work strategies.

You can explore the above plans in detail, compare the coverage, and get personalized quotes based on your unique needs right here using our free comparator below.

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How to choose the right group disability insurance coverage?

The first decision that has to be made is whether long-term or short-term coverage is needed and the decision will largely be influenced by the nature of the work undertaken by the employees.

This is because the risks associated with specific jobs carry a higher or lower risk of the eventuality that an individual will be placed on long-term or short-term disability leave. For example, in an office environment, it is unlikely that someone will be placed on long-term leave due to a covered disability, whereas a tree surgeon has a higher likelihood of sustaining an injury that will require long-term rehabilitation.

Additionally, the financial capacity of the company itself has to be taken into consideration as they have to be able to pay for the group disability insurance year after year. Some key considerations when choosing a group disability insurance policy include:

  • Risk Assessment: Employers should evaluate the likelihood of long-term versus short-term disabilities within their workforce.
  • Financial Implications: The cost of premiums versus the potential benefits payout should be considered.
  • Comprehensive Protection: Offering both types of insurance can provide a comprehensive safety net, covering a wide range of potential disabilities.

How much does group disability insurance cost?

Giving an exact figure on the cost of group disability insurance is impossible due to the nature of the policy and the wide variety of organizations that will look for coverage. In addition, each organization will be able to choose between a large array of optional add-ons that will increase or decrease the overall insurance premiums.

Most importantly, however, the group disability insurance cost is largely dependent on the following 4 factors:

  1. Benefit coverage amount: The benefit relates to how much your employees will receive from the insurance company if they are unable to work. The larger the benefit amount the higher the insurance premium.
  2. Number of employees: Group benefits usually require mandatory coverage for all employees, although sometimes a plan can be incepted with less.
  3. Average age of employees: Age is always one of the main factors when it comes to premiums. Group plans often base premiums on the average age of all insured employees.
  4. Industry and occupational risk faced by employees: The riskier the industry and work undertaken by the insured individuals the higher the premiums. Where underwriters find that the likelihood of a disability incurring increases, then an additional premium waiting will be applied.

Example cost for group coverage

Here's a simplified example table showing estimated group disability insurance costs for different types of groups in Canada. Keep in mind that these are rough estimates and actual costs can vary based on several factors including the insurer, policy specifics, and the group's characteristics.

Group TypeNumber of MembersAverage AgeOccupation TypeAverage Annual Salary per MemberEstimated Monthly Premium per Member
Small Business
1035Mixed$60,000$40 - $70
Medium-Sized Company
5040Office-based$70,000$30 - $60
Large Corporation
20045Mixed$80,000$25 - $55
Tech Startup
3030Tech/Office-based$85,000$35 - $65
Construction Company
7540Manual labor$55,000$45 - $80
Educational Institution
10042Mixed$65,000$30 - $60
Group disability insurance cost

Please note these figures are illustrative and actual premiums will be determined after a detailed assessment by the insurance provider.

We recommend getting individual quotes based on your unique needs to get the exact amount you would be paying. While getting quotes from multiple providers might seem daunting, we've made it simple for you. Use our free tool below and get access to multiple disability insurance plans and quotes in no time.

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Is group disability insurance a taxable benefit?

Receiving group disability insurance benefits is largely a taxable event. However, this rule is not set in stone. Paying tax on disability insurance income is dependent on the entity that pays for the insurance premium in the first place.

When an insurance premium is paid for by a company, then the income the employee receives from the disability insurance provider is regarded as personal income and taxed accordingly.

This is because the group disability insurance premium will be a business expense on which the company receives a tax break. Therefore, the requisite taxes need to be paid by the individual on receipt of the monthly benefit, whenever applicable.

However, some employers provide group disability insurance for their employees but require them to pay for the premiums on their own. In these instances, the employee will have already paid for the premiums, including the taxes on those premiums, and so any subsequent benefits that they receive from the insurance will not be taxed.

Where the group disability insurance premiums are split between the employer and employee, then the employee will only pay tax on any income benefit they receive in the same portion that was paid for by the employer.

Good to know

Read our complete guide "Is disability insurance tax deductible", to get a comprehensive understanding of how taxation works with disability insurance.

How to claim group disability insurance?

Claiming group disability insurance typically involves a couple of steps. The first always requires the individual to submit a completed claim form to the insurance provider's claims department, in addition to providing medical documentation to support the claim.

The company’s claim team will then review your claim against the insurance policy’s terms and conditions to ensure that the health condition in question is covered. If it is, then the insurance provider will approve the claim and the insured will start receiving the disability insurance benefits once the elimination period has passed, if any.

If a claim is declined, the claimant will receive a rejection letter in addition to steps they can take should they wish to appeal the outcome.

Throughout the entirety of the claim process, the claimant must stay in contact with their claim administrator to ensure that the claim is progressing in a timely fashion and so that they know to provide additional information if any is requested.

Group Disability Insurance Claim Deadlines

All disability insurance policies have a submission deadline from the disability date within which a claim must be submitted. If a claim is submitted outside of this window, the claim will be rejected.

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Patrik Shore Ex: Financial Crime Investigator
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Patrik Shore has nearly a decade worth of experience in the financial industry and has been writing for HelloSafe over the past year. Having started his career investigating financial crime to moving on to financial planning, Patrik has a deep understanding of all things personal finance.