Best Self Employed Disability Insurance in 2024

Being self-employed comes with many perks, but it also means you miss out on group disability insurance benefits. How will you and your business cope if you face a long-term disability? Our guide breaks down this critical yet often overlooked insurance coverage.

Discover everything about disability insurance for self employed in Canada: its importance, coverage details, differences between short-term and long-term options, how to get a plan, and the best plans for you and your family.

Compare plans easily and receive free, personalized quotes using our comparator tool right here.

Why do you need disability insurance for self employed people in Canada?

Disability insurance offers self-employed people peace of mind and a steady income if they fall ill or suffer a life-changing accident.

Self-employment disability insurance is the most important step to protecting yourself and your family. Millions of self-employed Canadians, from independent contractors to sole proprietors, lack access to group long-term disability insurance.

The reason to get disability insurance for self-employed people is simple: you stop worrying about what happens in the case of serious illness or injury because you know you, your family, and your business can cope. That’s why disability insurance is valuable for the self-employed in Canada.

What does disability insurance for the self-employed cover?

In most cases, traditionally employed people are passive in the arrangement of their disability insurance. However, self-employed people must carefully tread among definitions of disability, premiums, waiting times, and riders to ensure they are getting the best policy.

In Canada, disability insurance for self-employed workers functions similarly to salaried workers. If you are injured, ill, or disabled, you will receive regular payments for a period defined in your policy.

Here’s a short list of some medical conditions that qualify for long-term disability benefits for most insurance companies:

• Cancer
• Multiple Sclerosis
• Arthritis
• Fibromyalgia
• Bipolar Disorder
• Lupus
• HIV/AIDS
• PTSD
• Personal Injuries

Although the process is straightforward, insurers have different definitions for disability or illness, and the extent of their coverage varies as well. You can compare the coverage of various self employed disability insurance plans right here using our free tool below.

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What’s the difference between short-term and long-term disability insurance?

Disability insurance policies can be short-term or long-term. Short-term disability insurance for self-employed people covers provisional revenue losses that result from a temporary injury or illness.

On the other hand, long-term disability insurance protects you with a regular paycheck for longer periods. Some cover you for two years, others five. The best long-term disability insurance for self-employed people can cover you for decades, or even until retirement.

Short-term disability insurance for the self-employed

Short-term disability insurance covers self-employed people for up to six months, most commonly due to temporary unemployment resulting from a disability or illness. Most employers offer their employees this insurance through benefits such as paid sick leave.

Self-employed individuals have the opportunity to register for Canada’s Employment Insurance (EI) program for the self-employed, which yields 55% of your average weekly earnings to a maximum of $650 for up to 15 weeks (26 weeks if your claim starts on or after December 18, 2022).

However, you must be registered in the self-employed program for at least 12 months before you are eligible for the benefits, and for many self-employed workers, EI’s coverage is insufficient. In fact, for the self-employed, short-term disability insurance might not be the ideal solution as long-term policies offer more generous coverage for longer periods at a similar price point.

Long-term disability insurance for the self-employed

Long-term disability insurance usually covers 60-80% of your gross annual income for a longer period, typically years. The definition of total disability varies from insurer to insurer, so it is worth comparing disability insurance for the specific details between different policies.

Disability insurance should at least be considered by all self-employed professionals. Some people consider this type of insurance to be worth it only for those with risky jobs, but that is a big misconception. Fewer than 10% of disabilities are caused by accidents, and one in four workers in Canada has had to take time off due to a disability.

You can explore the best long-term disability insurance plans right here using our free comparator tool below. Explore multiple plans and get free quotes.

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How do I get disability insurance when I am self-employed?

It is simple for self-employed people to get disability insurance. They can speak with an insurance broker about a plan or purchase a plan online. You can quickly compare disability insurance options and premiums with our comparison tool at the top of this page. Disability insurance can be purchased online, directly through an insurer or broker.

For self-employed individuals, long-term disability insurance is well worth the monthly premium as it gives you the peace of mind that comes with being able to cover major bills and daily living expenses even if you cannot work at all.

Here’s a simplified version of the process:

• Use our comparison tool to get an idea of which insurer offers the best protection for you.
• Choose the benefit period and amount, based on your income, and add optional benefits to customize your coverage.
• Pay your monthly premium.
• File a claim if you become sick or disabled.
• Receive your monthly payments at the end of the waiting period, the number of days from the claim until you receive your first payment.
• Your payments stop when the benefit period ends or you return to work.

What factors should be considered when buying disability insurance for the self-employed in Canada?

How much your disability insurance policy covers will depend on your annual revenue, but in essence, the higher the income of a self-employed worker, the more disability benefits they will be able to buy. Insurers use your average annual income to determine the maximum amount of coverage they can offer you so that your disability benefits are equivalent to your current lifestyle.

Based on your tax returns, the insurer determines your average annual income. If you partially own your company, your annual income is calculated based on:

• The company’s business structure
• The percentage of the business you own
• The company’s annual revenue
• Your income
• Your bonuses and commissions (if any)

If, like many self-employed professionals, you are a freelancer or contract worker, the process is similar to that of a business owner. Based on your average annual income, the insurer decides how much coverage they can offer.

But before you take the plunge and sign up for a policy, consider the factors below to ensure your insurance policy is there to cover you when you need it.

Definition of disability for self-employed

The benefits you could get from disability insurance as a self-employed worker depend on how the policy defines disability. In general, insurers either define disability as the inability to perform one’s “own occupation” or as the incapacity to do “any occupation.”

• Own occupation means your policy is triggered if a disability hinders your ability to perform the primary tasks of your main profession, your own occupation, even though you might be able to exercise another profession. For example, arthritis might prevent a carpenter from executing their primary tasks, but they could still work as a carpentry trainer.
• Any occupation, on the other hand, defines disability in more rigid terms. The claim is accepted only if your disability prevents you from performing any profession. In this case, if the insurer considers you able to work in another occupation, they will not offer you the policy’s disability benefits. The carpenter from the example above, for instance, would not qualify for benefits under this definition.

Note that some policies may offer benefits under the “own occupation” definition for a set period before switching to “any occupation” later on.

Waiting Period

The waiting period sometimes called the elimination period, is the time you have to wait between your claim and the start of the benefits. The usual waiting period is 90 to 120 days, but it can be as short as 30 days and as long as 2 years. The shorter the waiting period, the higher the monthly premium.

During the waiting period, it might be worth considering the federal EI program for self-employed individuals. As long as you’ve been registered for more than 12 months, you are eligible to receive 55% of your average weekly earnings to a maximum of $650 for up to 15 weeks (26 weeks if your claim starts on or after December 18, 2022).

Benefit Amount

The benefit amount indicates the amount of money you will receive monthly in the case of disability. The amount is usually between 60% to 80% of your average gross annual income. Naturally, the higher the proportion, the higher the premium.

Benefit Period

The benefit period is the maximum amount of time you can receive the benefits on your disability insurance. Policies shorter than 2 years are considered short-term disability insurance, but the best long-term disability insurance for self-employed workers offers benefits until retirement.

Given that disability insurance for the self-employed acts to protect income, the most suitable choice is the maximum benefit period, but the longer the benefit period, the higher the monthly premium.

Renewability

The best disability insurance in Canada includes a guarantee that the insurer will not cancel the policy or change the premium rate. The non-cancellable and guaranteed renewable policies (as they are called) offer the most comfort and ease, but some self-employed professionals, such as new business owners, might find it difficult to secure these policies as disability insurers require consistent income.

In these cases, the insurance company might offer you a non-cancellable policy. In other words, the insurer promises not to cancel the policy but retains the right to increase the premium.

Riders

Riders are optional extras you can add to your disability insurance policy (for an extra fee) to customize it to your needs and requirements. A common example is a residual or partial disability rider which allows you to file a claim and receive benefits in the case of a partial disability that affects your income.

Another common rider is the cost of living adjustment rider. The COLA rider, as it’s often called, ensures that your benefit amount keeps up with annual inflation.

The future increase option is useful for self-employed professionals who expect their income to increase in the next few years and want their policy to keep up. It allows you to add more coverage to your policy without having to go through the process of starting a new one.

Finally, if you cancel your coverage without ever having filed a claim, with the return of premium rider you will receive part of the premiums you paid in a lump sum.

Premiums

Self-employed disability insurance requires you to pay the insurer a premium every month. The premium is calculated depending on a variety of factors, but you can count on paying between 1% and 3% of your annual revenue.

A higher annual income means higher monthly paycheques in the case of disability, which in turn also means a higher premium. Other factors that affect the cost of disability insurance for self-employed professionals are occupation, gender, age, and policy details.

Your occupation affects the cost of your policy. Physically demanding occupations come with an increased risk of injury or physical disability which means the riskier the job, the higher the premiums. Insurance companies have a class system they use to rank different jobs according to the risk of disability.

Your age and gender also affect how much you’ll need to pay each month. The risk of disability grows with age, which means younger applicants can get cheaper premiums. Similarly, in general, men have a lower risk of injury, so premiums are more expensive for women.

The details of your policy will also affect its cost. The best long-term disability insurance for self-employed workers comes with a shorter waiting period, higher benefit amount, longer benefit period, and an “own occupation” definition of disability. Although this policy provides the best coverage, it also costs more than basic disability insurance.

How much is disability insurance for self employed individuals?

You can quickly compare disability insurance rates and options with our comparison tool at the top of this page. Disability insurance can be purchased online, directly through an insurer or broker.

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

Age of insuree	Gender of insuree	Insured monthly payout	Monthly premium
30	man	$1,500	$26
30	woman	$1,500	$30
50	man	$1,500	$55
50	woman	$1,500	$59

The only way to know exactly how much you'll pay for your insurance is by getting a quote. You can compare disability insurance quotes for the self-employed right now using our free tool below.

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Is disability insurance tax deductible for self-employed in Canada?

Most people dread filing taxes, and self-employed people are far from being an exception.

The premiums on disability insurance for self-employed individuals in Canada are considered a personal expense as opposed to a business expense. As a result, they can’t be deducted from your business income and are thus not tax deductible.

However, you do get a tax break if you ever file a claim. The benefits you receive from disability insurance are tax-free. In other words, the earnings you receive from the insurer will not be taxed as your regular revenue is — something to consider when deciding how much of your income you want a disability insurance policy to cover.

What is the best disability insurance for the self-employed?

Although the best disability insurance for you might not look the same as the next person’s, it always helps to shop around and compare the market so you ensure the best price for the policy you need.

Here’s a list of some of the best disability insurance for the self-employed in Canada:

Canada Life Independence Protection

Canada Life offers one of the best protections, notably covering self-employed individuals with as few as 20 working hours per week and an annual income of $12,000.

If you think Canada Life could be the right choice for you, you can get a quote right here.

Blue Cross Blue Vision

This policy offers renewability until the age of 65 but coverage for accidents can be extended beyond that if you decide to continue working. Blue Cross also accepts self-employed workers with seasonal occupations, working at least 20 hours per week for 8 months in the year.

iA Superior Program

iA disability insurance is notable for not having a minimum annual income. Their monthly benefit amount can go up to $10,000, and they even offer the option to eliminate the waiting period so you can start getting paid as soon as you file your claim.

If you think iA could be the right choice for you, you can get a quote right here.

Manulife Venture Series

Manulife Venture disability insurance policy can pay out up to $24,500 monthly. It’s also worth noting that the waiting period for this policy can be 730 days, which significantly reduces the monthly premium.