Long term disability insurance in Canada

How long-term disability insurance works

A long-term policy pays a monthly benefit — typically 60 to 67 percent of your gross income — after a waiting period that's usually 90 or 120 days. Payments continue for as long as you remain disabled, up to the benefit period you chose: commonly 2 years, 5 years, or to age 65. If you pay the premium yourself with after-tax dollars, the benefit is received tax-free.

Waiting period and benefit period

• Waiting (elimination) period — the gap before benefits start. A longer wait (90, 120, or more days) lowers the premium, so it's matched to how long your savings or a short-term plan could carry you.
• Benefit period — how long payments last. To-age-65 is the strongest and most popular choice; shorter 2- or 5-year periods cost less but leave a career-ending disability partly uncovered.

Own-occupation matters most on long-term policies

Because long-term claims can run for years, the definition of “disabled” carries real weight. An own-occupation definition pays if you can't do your specific job, even if you could work elsewhere — far more generous than an any-occupation definition, which only pays if you can't do any job you're suited to. For specialists and high earners, own-occupation is usually worth the extra premium.

Group vs individual long-term disability

Group LTD is a good foundation, but it typically caps at 60% of base salary, ignores bonuses and commissions, is taxable when your employer pays the premium, and ends the day you change jobs. A portable, tax-free individual policy on top fills those gaps. For most working Canadians the answer isn't group or individual — it's group plus a modest individual top-up.

What long-term disability insurance costs

As a rough guide, individual long-term coverage runs about 1 to 3 percent of your annual income per year. Your occupation class is one of the biggest factors — desk-based roles price far below manual trades — along with your age, the waiting and benefit periods, and any riders. For the full picture, see the disability insurance guide, and if you have variable income or no group plan, the self-employed guide is the better starting point. A shorter absence is covered by short-term disability.