Compare & Buy Canada’s Best Disability Insurance

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What is disability insurance?

Disability insurance provides a monthly benefit (in the form of a cash payment) to partly replace income you lose while you are recovering from an illness or injury. This payment helps minimize the financial and emotional impact of not receiving your paycheque.

How does disability insurance work in Canada?

Disability insurance offers you protection against loss of income by replacing a substantial portion of your paycheque if you become disabled.

The insurance company typically agrees to replace 60 to 85 percent of your regular income, regardless of whether the loss of your earning ability was due to a sudden accident or a degenerative illness.

This ‘benefit’ payment is made to you until you return to good health (i.e. resume working) or until the end of your disability coverage period – whichever comes earlier. The amount of the monthly benefit depends on the amount of coverage you take and other factors like the waiting period and occupation definition you choose.

Learn more about how disability insurance works.

Some assume they have full disability coverage through their work disability insurance (known as group disability insurance) or another policy they may have like critical illness insurance. Unfortunately, this is not typically the case. While it's possible you have limited coverage through your work, individual disability insurance coverage often goes beyond the protection limitations of other forms of coverage you may already have.

Learn more about the differences between critical illness and disability insurance.

Group disability insurance is purchased by your employer who offers it to you, the employee. Because the employer has purchased this policy, essentially in bulk for the company, they might receive a discounted rate compared to the cost of individually insuring each employee. However, as a result, coverage is limited. The employers get to pick the coverage for you and they may also change it from year to year. With an individual policy, you get to decide what coverages you need and how much you pay for it.

Learn more about the differences between group and individual disability coverage.


Should I get Disability Insurance?

Absolutely, one should get disability insurance and protect their livelihood.

Disability coverage is a must-have for:

  • Those who depend on regular income to pay for rent or mortgage costs
  • Those who need a paycheque to support family or other regular living expenses
  • Those with limited access to savings to maintain their current lifestyle for an extended amount of time

Serious illness, debilitating injuries, mental health, and other issues which require lengthy hospital stays are common in Canada. Around 1 in 7 Canadians have a disability. Additionally, 33% of workers between ages 30-64 will experience a disability for longer than 90 days. While health care covers the cost of treatment, it does not cover lost wages from missing work.

If you are one of the majority of Canadians that depends on your ability to earn a paycheque to maintain your quality of life, a disability insurance policy is worth it. You can use the proceeds in several ways while you recover:

  • Income replacement
  • Ongoing expenses
  • Doctor consultation
  • Rehabilitation
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Do I need supplemental disability insurance?

There are some clear factors you can consider when deciding whether you need to purchase supplemental disability insurance. With a supplemental (or independent) disability insurance policy, you own your coverage. This is the opposite of a group plan, where the policy administrator (such as your employer) owns the policy and controls its details.

With supplemental disability insurance, you can seek the maximum coverage amount your individual circumstances allow and add additional top-ups to make it the perfect policy for you.

The coverage is portable: it goes wherever you go, regardless of whether you change employers or make new friends with new group memberships. Your cost of insurance will not change unless you increase the coverage amount.

With so much depending on your earning ability, group disability plans may not be enough. Instead, consider supplemental disability coverage.

Can I buy disability insurance on my own?

Yes, you can apply for your own disability insurance policy, which you own outright and does not belong to your employer (workplace benefits) or your association or group (a collection of professionals like doctors, dentists, etc).

Does term life insurance cover disability?

No, term life insurance does not cover lost income due to disability in Canada.

However, if you are contemplating getting term life insurance soon, you may have the ability to add a disability insurance rider to your policy as an optional benefit.

Many insurance providers have coverage options for disability or critical illness riders that can supplement your income should you fall ill.

Your best bet is to speak to one of our licensed insurance advisors to see what coverage is best for your situation.

Learn more about whether term life insurance covers disability


Is disability insurance taxable?

The answer is … maybe. Disability income may or may not be subject to income tax depending on whether the policy premium was funded with pre-tax or after-tax dollars.

If you are paid out by a policy that was fully or partly paid by your employer or group association, you will be taxed when you receive the monthly payment.

However, for disability plans you pay entirely on your own you do not pay taxes on your payout. If you are paying the full price for premiums throughout your coverage period, and do not claim them as tax-deductible business expenses, you will not be taxed on the payout during the benefit periods upon filing a claim.

Short term disability insurance Vs. Long term disability insurance

The major difference between short term disability insurance and long term disability insurance can usually be narrowed down to the length and severity of an injury or illness. Short term disability insurance is generally part of one's workplace benefits and provides a weekly sum of cash while you're recovering.

Long-term disability insurance is meant to replace or augment a portion of your income should you become injured or ill and it affects your ability to work for an extended period of time.

Short Term Disability Insurance


Long Term Disability Insurance

  • Limited time coverage, usually for 6 to 26 weeks
  • Common coverage terms are 2 years, 5 years, or longer period of time up to age 65
  • Usually offered through employers
  • Generally purchased individually, to supplement employer coverage
  • Provides weekly income replacement
  • Provides monthly benefit for income replacement
  • Benefits can begin 1-14 days after disability
  • Benefits begin after short-term disability waiting period is over
  • Typically claimed for temporary health issues such as sports injuries, back problems, infections, soft tissue injury, etc.
  • Typically claimed for a mental health issue, musculoskeletal issue, accidental injury, physical disability, etc.
  • Who offers the best disability insurance in Canada?

    Best Life insurance trophy
    Best Life insurance trophy

    PolicyAdvisor helps Canadians find the best disability insurance policy for their income protection needs. But let’s be frank. There is no best disability insurance company. There is – however – the best company for YOU.

    Canada is home to many established insurance companies that offer short and long term policies. For example, Manulife, RBC Disability Insurance, Canada Life, Desjardins, and Industrial Alliance (iA) are some industry leaders that we work with to set up disability insurance.

    At PolicyAdvisor, we work with the best disability insurance companies. We have compiled extensive research to provide you with the best quotes. We vouch for any disability insurance company we represent and you come across using our online tools. We are happy to speak with you regarding your disability insurance advice needs.

    What is the definition of disability?

    There are three different kinds of disability coverage one can purchase. Own, Regular, and Any.

    • Own-Occupation: A policy with an own-occupation definition protects your ability to work in your specific profession. There are no restrictions: for instance, you can continue to receive benefit payments even if you’re able to work in another occupation or in any other capacity.
    • Regular-Occupation: A policy with a “Regular Occupation” definition also protects your ability to work in your pre-injury occupation or one fitting your experience and level of education.If you choose to work in a different occupation, your benefits will be reduced, or fully withdrawn.
    • Any-Occupation: This is the most stringent definition of disability that can be covered in a disability insurance policy. Under this type of policy, you may be ineligible to receive benefits if you can work in any other job.

    Learn more about the definition of disability.

    Frequently asked questions

    What is covered under disability income insurance?

    A disability plan’s monthly benefit can cover your everyday expenses as well as any long-term debt repayments and medical bills should you be unable to work and earn an income.

    How much is the cost of disability insurance?

    The cost of individual, private disability insurance depends on many factors, including the benefit period, the monthly benefit for income replacement, your health, and your occupation. Generally speaking, the cost of a disability policy is between 1 and 3% of your annual income. So an individual making $100,000 in annual pre-tax income will pay between $1,000 to $3,000 in annual premium cost for a disability policy.

    Learn more in our Honest Guide to Disability Insurance.

    Does my age or smoking status affect my disability premium?

    Generally the older you are, the more likely you are to suffer a disability, and the premium you pay will be higher. Smoking is also seen as an added level of risk with higher premiums.

    Will my occupation affect how much I have to pay for a disability policy?

    Premiums take into account the type of occupation the person has and the perceived level of risk. A high-earning professional doing most of their work inside an office will have a lower premium compared to a manual labourer or skilled tradesman.

    Can I apply for disability coverage if I am already ill or injured?

    If you have become ill or injured and are unable to work and earn an income, you will not be able to obtain a disability insurance plan to cover you for the current situation. However, you may still apply and qualify for a disability insurance plan for future events once you return to work.

    Do I need disability insurance if I already have coverage elsewhere?

    Some assume they have full disability coverage through their workplace group insurance disability benefits or another policy they may have like critical illness insurance. Unfortunately, this is not typically the case. While it's possible you have limited coverage through these means, an individual disability insurance plan often goes beyond the protection limitations of other forms of coverage you may already have.