Disability insurance

Understanding disability insurance

Disability insurance helps protect you and your family from an unexpected illness or accident. It provides protection if you’re unable to work and earn an income.

Generally, disability insurance replaces between 60% and 85% of your income. It replaces your income up to a maximum amount, for a specified time if you:

Permanent refers to the nature of the disability. It doesn’t mean that you'll get benefits for the rest of your life.

Many employers offer disability insurance. However, disability insurance plans are also available through a life and health insurance agent.

If you're self-employed, you may want to consider getting disability insurance. It will cover many of your business expenses if you're unable to work.

When buying disability insurance, make sure you understand the terms and conditions of the plan. Ask your insurance agent about anything you don't understand.

Learn more about disability insurance with the Canadian Life and Health Insurance Association’s Guide.

What to consider when buying disability insurance

If you're considering disability insurance, check with your employer first to see if you already have group disability coverage. Before getting disability insurance, shop around and make sure you understand:

Learn how insurance works.

Insurance companies may define disabilities differently. The definition may even vary between different insurance plans from the same company.

Some disability plans may also require that you join a rehabilitation program to help you get back to work.

Check with your insurance agent for your plan’s definition of disability.

Short-term disability insurance

Short-term disability coverage typically provides benefits for up to 6 months while you're sick or injured.

If your employer has a short-term disability plan, you must make your claims through that disability plan. Speak with your employer for details on your disability plan. Some employers may also offer paid sick leave.

You may be eligible for Employment Insurance (EI) sickness benefits. For example, if you don't have short-term disability coverage or sick leave through your employer.

Learn more about Employment Insurance sickness benefits.

Long-term disability insurance

Long-term disability insurance generally begins when the following benefits end:

Most long-term disability plans will replace 60% to 70% of your normal income.

Each disability plan is different. Some may provide disability benefits for up to 2 years if you're unable to return to your job. After 2 years, you may continue to receive benefits if you're unable to perform any job.

Other sources of disability benefits

You may also be eligible for benefits from the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP). These pensions add to your income when you're unable to work.

The CPP and QPP disability benefits are available to people who:

Learn more about the Canada Pension Plan disability benefits.

Learn more about the Quebec Pension Plan disability benefits.

Offsetting of benefits

Any benefits you receive from an insurance plan may reduce (or ‘’offset’’) the income you get from another one.

If you have multiple disability insurance plans, your income usually won’t be higher than 60% to 85% of your regular pay.

Many long-term disability insurance plans reduce your benefit amount as soon as you get other sources of disability income.

Check with your insurance agent to find out how your plan manages offsetting of benefits.

Disability insurance benefits and taxes

Generally, if you pay the entire amount of the disability premium yourself, your disability benefits will be tax-free. This may bring your income while on disability closer to your normal pay.

If your employer pays all or part of the disability premium, your disability benefits will be subject to income taxes.

Learn more about tax credits and deductions for persons with disabilities.

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