If you are unable to work because of an accident or illness, disability insurance replaces part of your income so you can keep paying your bills. Many employees have some disability coverage through their employer or the government, but it is often not enough to cover all of their needs.
Short-term and long-term disability
- Short-term disability covers shorter absences, often up to a few months, such as recovering from surgery or an injury.
- Long-term disability covers serious, long-lasting conditions. Benefits can continue for several years or up to age 65, depending on the plan.
Key features to compare
- Monthly benefit: how much of your income the plan replaces.
- Waiting period: how long you must be off work before benefits start, commonly 30 to 120 days. A longer waiting period lowers the cost.
- Benefit period: how long the benefits will be paid.
- Definition of disability: “own occupation” plans pay if you cannot do your own job, while “any occupation” plans pay only if you cannot do any suitable job.
- Taxes: benefits from a personal policy you pay for yourself are generally tax-free.
Who needs it most?
Disability insurance is especially important for self-employed people, business owners, people in physical or trade jobs, and anyone whose family depends on their income. If your group plan is limited, a personal policy can top it up and stays with you if you change jobs.
Learn more on our disability insurance page, or compare it with critical illness insurance.
Common questions about disability insurance
How soon do benefits start? Most policies have a waiting period, also called an elimination period, before benefits begin. Common choices are 30, 90 or 120 days. A longer waiting period usually means a lower premium, so it helps to know how many weeks your savings could cover.
What does “own occupation” mean? An own-occupation definition pays benefits if you cannot do the main duties of your own job. An any-occupation definition only pays if you cannot do any job you are reasonably suited for. The wording makes a big difference at claim time.
Are the benefits taxable? If you buy an individual policy and pay the premiums yourself, the benefits are generally tax-free. Benefits from an employer-paid group plan are usually taxable.
Doesn’t EI cover this? Employment Insurance sickness benefits are short-term, paying for up to 26 weeks at a portion of your earnings, up to a maximum. For longer illnesses or injuries, private coverage fills the gap.
See how coverage can fit your budget: disability insurance in Toronto and Brampton.
Talk to Devendra Kumar, Financial Planner (CLU, CHS)
DK Insurance & Investment Inc. helps families across the GTA from offices in Vaughan, Mississauga and Brampton. Call or text +1-647-761-0517 for a free, no-obligation conversation, or send us a message.