Get the Best LTD Insurance in Canada for 2022

If the worst happened and you were unable to work again for years or even for the rest of your life, how would you manage?

In Canada, the Canadian Pension Plan and the Quebec Pension Plan can pay limited disability benefits but with tight upper restrictions on pay-outs and a common wait time of four months before the first payment, there are clear incentives for researching private long-term disability options.

What is long-term disability insurance?

Long-term disability or LTD is insurance coverage that pays out if you suffer from a permanent disability or are unable to return to work for more than 6 months.

A long-term disability insurance policy can have waiting times and upper limits tailored to your specific needs and can offer untaxed, regular income to help pay expenses.

If you are temporarily disabled due to an accident or illness, a short-term disability benefit or a different type of policy can cover a percentage of your earnings until you are well enough to return to work. This percentage is usually between 60% and 70%.

Every insurer will have shaped their long-term disability policy slightly differently. Typically, however, a policy will cover you for between 2 to 5 years. After this time there will be a medical reassessment to verify if you can still longer work or if there are other types of work you might be able to do. For example, a physical disability that prevents you from working in construction might not prevent you from working in an office.

How does long-term disability insurance work?

Say that you are working but fall ill, or are unlucky enough to suffer a debilitating accident. If you use all of your allotted sick days and are still unable to work then you would activate your short-term disability. This is either a privately funded policy, one arranged by your employer or the government-run EI.

These policies are designed to run for a limited time and cover temporary disabilities. EI short-term disability runs out after 15 weeks. Private short-term disability can vary between policies but typically does not last longer than 6 months.

After short-term disability runs out if you are still unable to work you still will need to look either to a government pension plan or private long-term disability insurance.

LTDs pay between 60% and 70% of your former earnings.

What is the difference between long-term and short-term disability?

Long-term disability insurance begins when short-term insurance or EI benefits end. Long-term disability typically covers permanent disabilities, that is injuries or illnesses that will continue to affect your ability to work. 

Long-term disability distinguishes between whether you can return to the job you had previously and whether you can work any job. For example, a loss of mobility might prevent a return to manual labour but not a less physically demanding office job.

Short-term disability covers temporary conditions with the understanding that you will return to work eventually. 

Types of disabilityNature of disabilityDuration of disabilityDistinguish between ability to do your job and any job?Provided by
Short-term disabilitytemporaryUp to 6 months Private or through an employer
Long-term disabilitypermanentAfter 6 months Private or through government pension plan (CPP or QPP)
Short-term disability vs long-term disability

Good to know

Please see our short-term disability guide for more information.

How to apply for long-term disability benefits?

Long-term disability insurance can be purchased directly through an insurer or an insurance broker or online.

Long-term disability policies can differ wildly in terms of contributions, upper payment limits, renewal and waiting period. Some will ask for a second medical evaluation after 2 years, others after 5.

Finally, some policies will insure you in case you are unable to do your job, whereas others will insure you in case you are able to do any job. If you have a well-paid, high-skilled job that you are no longer able to do, the first type will compensate you while the second would not if you are still able to perform a lower-paid, low-skill job.

For all these reasons it is essential to identify your specific needs from a policy and shop around online to find the best deal for you.

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Do I need long-term disability insurance?

If you are unable to return to work you will need a source of income.

If you have contributed to the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP) you may be eligible for the CPP disability benefit or QPP disability benefit. The average monthly CPP disability payment in 2021 was $1,064.80. It is worth noting that after retirement, the disability benefit from CPP roughly halves to a 2021 average of $524.64.

If these amounts sound too low to cover your expenses then perhaps a long-term disability insurance plan could cover the deficit and boost your monthly income.

Additionally, low-income freelancers may have made extremely limited contributions to the CPP or QPP. If you suspect that you might fall below the minimum contribution threshold then long-term disability might be a necessary replacement.

How much does long-term disability insurance cost?

Long-term disability insurance typically costs between 1% and 3% of your gross earnings. Rates will vary between companies and depending on your age, income and how long a waiting delay you decide on before the policy kicks in.

To give you a rough idea of costs, the table below outlines quotes for different age and income profiles from a leading policy provider:

Age of insureeMonthly 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

What qualifies for long-term disability?

The definition of a disability can vary in-between different insurance companies and even between different policies in the same company.

Your symptoms, their severity, and how they prevent you from working are more important in qualifying for short-term disability than the specificity of your condition. 

However, a diagnosis allows a doctor to create a treatment plan for you. Insurers prefer to have a clear diagnosis and treatment plan and may stop payments or even deny your claim if they do not see an attempt to change your condition. 

Watch out!

Some insurance companies may hire private investigators to surveil recipients of large long-term disability payouts, especially if you are young. However, they can only surveil you in public spaces (whether physical or online).

Burn-out and stress are vaguely defined conditions that will require a strong diagnosis in support of an approved claim. By contrast, depression and anxiety are nationally recognized as disabilities and have clear definitions and treatment plans. 

Here are some common conditions that may qualify for long-term disability:

  • Anxiety
  • Back Problems
  • Bipolar Mood Disorder
  • Carpal Tunnel Syndrome
  • Chronic Fatigue Syndrome
  • Chronic Pain
  • Complex Regional Pain Syndrome
  • Crohn’s Disease
  • Depression
  • Fibromyalgia
  • Heart Disease
  • Headache and Migraine
  • Irritable Bowel Syndrome (IBS)
  • Knee Disorders
  • Lupus
  • Lyme Disease
  • Multiple Sclerosis
  • Neck and Cervical Disorders
  • Psoriatic Arthritis
  • Sleep Disorders
  • Vestibular Disorders
  • Visual Disorders

How long does long-term disability insurance last?

Long-term disability begins once short-term disability runs out.

If you are changing from short-term to long-term with the same company it will a case of filling out forms in order to switch policies.

If you are changing insurance providers you will likely have to undergo another examination by a medical professional to certify that you are unable to work.

Policies vary between providers but after 2 to 5 years you will likely have to undergo another medical examination. This may determine whether you are unable to do any work or only the kind of work you used to do.

If you do not have specific insurance coverage for your type of job then you may have to get a different type of job that you are still able to do. These crucial differences between policies are why it is key to shop around online and find the right policy for you.

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Who pays for long-term disability?

The Canadian Pension Plan and the Quebec Pension Plan are paid for by your taxes. CPP and QPP benefits are distributed by the Canadian government.

Self-funded private disability insurance is paid for by your contributions.

Is disability income taxable in Canada?

This depends on the type of disability insurance you have.

Insurance providerWho pays LTD benefits?Is the LTD income taxable?
CPP or QPPCanadian government
Private LTD insuranceInsurance company
Group insurance planInsurance company
Employer-funded planYour employer
Taxable disability income

If you want non-taxable, secure disability protection that is not reliant on your employer´s cooperation, you can use our comparison tool to find the best deal to protect yourself and your income now.

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