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- Common myths about disability insurance can create confusion about who needs coverage and what policies actually cover
- One of the most common myths is that you do not need disability insurance if you are healthy
- Another myth is that employer-sponsored and government disability benefits are enough, so individual disability insurance is not necessary
- It is also myth that disability insurance covers only accidents, but in reality, it can also replace income if a mental health condition prevents you from working
According to Statistics Canada, the rate of disability in Canada has been increasing; it increased from 17% to 22% in recent years. Despite the increasing number of disability cases, Canadians are still reluctant to get disability insurance due to the many myths that surround disability insurance coverage. These myths around eligibility, coverage, costs, claims, and more can stop them from considering it. Understanding the reality behind these common myths helps you make an informed decision when it comes to buying disability insurance.
Disability Insurance in Canada: The facts behind the myths
Disability insurance replaces 60%-85% of your income if an injury, mental health condition, or illness prevents you from working. It provides a monthly benefit to the insured once they complete the waiting or elimination period. Despite the many benefits of disability insurance, several myths about disability insurance coverage still persist.
| Myths | Reality |
| You don’t need disability insurance because you are healthy | An unexpected illness or injury can affect your ability to work and earn an income at any time |
| Employer’s group disability plan is enough | Group coverage can provide valuable protection, but benefit amounts, definitions of disability, duration, and portability are often limited |
| Disability insurance only covers physical injuries | Depending on the policy, coverage can include disabilities caused by illnesses and mental health conditions |
| Disability insurance is too expensive | Premiums vary based on factors such as age, occupation, income, coverage amount, waiting period, and policy features |
| You have to be completely unable to work to receive benefits | Some policies provide benefits for partial or residual disability when a condition reduces your ability to work or earn income |
| Disability insurance pays benefits immediately after you stop working | Most policies have a waiting or elimination period that must be completed before benefits begin |
| Government benefits will fully replace my income if I become disabled | Programs such as CPP disability and EI sickness benefits have benefit limits and may replace only part of your income |
| Your savings will be enough to replace the lost income during disability | Savings may help cover expenses temporarily, but a prolonged disability can deplete your savings |
| Disability insurance claims can often be denied | Claims are assessed based on the policy’s definition of disability, medical evidence, eligibility requirements, exclusions, and other policy terms |
| Once the claim is approved, benefits are guaranteed for life | Benefit payments continue only while you meet the policy’s definition of disability and until the benefit period |
Explaining common myths about disability insurance
Misconceptions about disability insurance often come from assumptions about who needs coverage, what policies cover, and how claims are paid. In the section below, we have explained these myths:
Myth 1: You don’t need disability insurance because you are healthy
Being healthy today does not guarantee that you will never experience an illness or injury that affects your ability to work. The chances of many disability conditions, like back problems, increase with age.
The risk of disability will always be there, irrespective of your age, health, or profession. For this reason, disability insurance is an important financial tool that provides income protection if a covered disability prevents you from working.
Myth 2: Employer’s group disability plan is enough
Employer-sponsored group disability insurance can provide income protection, but it may not cover your full income or offer the same comprehensive features as an individual policy. The coverage amounts, disability definitions, benefit periods, exclusions, and portability can vary by plan.
Some group LTD plans change the definition of disability after an initial period, often from own occupation to any occupation. If you change employers, your group coverage may also end. Therefore, employer-sponsored coverage may not always be enough.
Myth 3: Disability insurance only covers physical injuries
Another common myth is that disability insurance covers only physical injuries. In reality, some policies may also pay benefits when an illness or mental health condition prevents you from working. However, a diagnosis alone does not guarantee benefits. The coverage depends on whether you meet the policy’s definition of disability and other eligibility requirements.
Myth 4: Disability insurance is too expensive
The perception that disability insurance is too expensive often comes from focusing on the premium rather than the income protection the policy provides. The disability insurance cost varies based on factors such as age, occupation, income, coverage amount, waiting period, benefit period, and optional riders.
When you actually compare these features against the cost, you will realize that the premiums are not that expensive. A longer waiting period or lower benefit may reduce the premium. Comparing quotes can help you find a policy that provides the coverage you need while fitting within your budget.
Myth 5: You have to be completely unable to work to receive benefits
Not every disability claim requires complete inability to perform all work. Depending on the contract, partial or residual disability benefits may apply when a medical condition reduces your ability to perform key duties or causes a loss of income. The policy may require proof of reduced capacity, reduced earnings, or both. One must check the contract’s definition of partial and residual disability.
Myth 6: Disability insurance pays benefits immediately after you stop working
The disability benefit payout generally does not start immediately after you stop working. You must first complete the policy’s elimination or waiting period, meet the insurer’s definition of disability, and satisfy other requirements before benefits begin. The waiting period for short-term coverage is 0-14 days, while for long-term disability insurance, it can be 4, 8, 12, 16, 20, or 52 weeks or even 2 years.
Myth 7: Government benefits will fully replace my income if I become disabled
Like employer-sponsored plans, government programs such as Canada Pension Plan disability benefits and Employment Insurance sickness benefits also offer limited coverage compared with an individual policy. EI sickness benefits provide up to a maximum of $729 a week and may be payable for up to 26 weeks. CPP disability benefits have their own eligibility requirements and depend partly on the person’s contribution history. The maximum CPP disability amount in 2026 is $1,741.20 per month, but not every recipient receives the maximum.
Government-sponsored programs therefore may supplement other coverage and cannot fully replace your income in the event of a disability.
Myth 8: Your savings can help you replace the lost income during disability
Savings may help cover a short period without income, but their adequacy depends on your expenses, debt, dependants, and the expected length of the disability. A prolonged disability can deplete savings, especially when housing, healthcare, business, or family expenses continue.
Disability insurance can provide a regular benefit if you meet the policy requirements, allowing savings to remain available for emergencies and long-term goals.
Myth 9: Disability insurance claims can often be denied
Disability claims are assessed against the policy’s definition of disability, medical evidence, eligibility rules, exclusions, and other terms. A claim may be denied if the evidence does not establish functional impairment, the claimant does not meet the applicable occupational definition, a limitation applies, or required information is missing.
However, a denial does not by itself mean that disability insurance claims are routinely denied. Also, if you find out that the claim has been wrongly denied, you can dispute the claim with all the supporting documents.
Myth 10: Once the claim is approved, disability benefits are guaranteed for life
The approval of a disability claim once does not mean that the benefits will be guaranteed for a lifetime. Benefits generally continue only while you meet the policy’s definition of disability and comply with ongoing requirements, such as providing medical evidence or participating in reasonable rehabilitation.
Payments may end when you recover, fail to meet the definition after a change from own occupation to any occupation, reach the maximum benefit period, reach the policy age limit, or trigger another termination provision.
Is disability insurance worth it?
Disability insurance can be a valuable financial protection for individuals who rely on their income to cover their everyday and long-term expenses. It can be particularly useful for those who:
- Want to protect a portion of their income if they become disabled
- Have significant financial obligations
- Have limited savings to cover a prolonged period without income
- Have limited or no employer-sponsored disability coverage
To find suitable disability insurance in Canada, you can get in touch with our licensed advisors. Our advisors can help you compare coverage options and determine how much income protection you may need. Schedule a free call today!
Frequently Asked Questions
Is disability insurance necessary if I have workplace coverage?
Employer-sponsored disability insurance can provide valuable protection, but it may not replace your full income or provide coverage for as long as you need. Individual disability insurance can supplement workplace coverage, depending on your needs and existing benefits.
Does disability insurance cover mental health conditions?
Yes, disability insurance policies can provide benefits for eligible disabilities caused by mental health conditions. However, please note that the exact coverage will be subject to the policy’s definition of disability, exclusions, limitations, and other terms.
Can disability insurance replace my entire income?
No, disability insurance cannot replace your entire income. It can replace a maximum of 85% of your income rather than 100%. You must check with your employer or insurer to understand the exact coverage you will receive from your disability policy.
Can self-employed Canadians get disability insurance?
Yes, self-employed individuals can purchase individual disability insurance to protect their personal income. This can be particularly relevant when they do not have access to an employer-sponsored group disability plan.
Can I have both group and individual disability insurance?
Yes, you can have individual disability insurance alongside employer-sponsored coverage. The benefits available under each policy depend on their respective terms, coverage limits, and definitions of disability.
Does disability insurance cover accidents and illnesses?
Yes, disability insurance can cover disabilities caused by both accidents and illnesses, depending on the policy. The coverage may also extend beyond accidents to cover mental health conditions that can prevent you from working.
Common myths about disability insurance can make it harder to judge whether you need coverage, what it includes, and how benefits are paid. These misconceptions can prevent people from understanding the role disability insurance plays in protecting their income when an illness, injury, or mental health condition affects their ability to work. Understanding the facts behind these misconceptions can help you make more informed decisions about disability insurance and income protection.
