How Does Disability Insurance Work in Canada?

Disability insurance in Canada is something you may think you don’t need because you are young and healthy, but the truth is, if you earn an income you need disability insurance. Now, you aren’t going to go jail if you don’t have disability insurance, but you will find yourself in a lot of trouble if something happens and you can’t work.

What is a disability?

For insurers, the term "disability" refers to something physical or mental that prevents you from working for a prolonged period of time. This could be a temporary situation, or a long-term one. For example, you may get into a car accident and suffer some injuries that leave you hospitalized. You can’t return to work right now, but you expect to be able to return to work in the not so distant future. This would be considered a temporary disability. You may also develop an illness that requires a lot of doctor’s visits, hospital time, and medications that leave you unable to perform your work duties safely or coherently – or you simply don’t have the energy to work because of it. You don’t know if or when it will resolve, and this is considered a long-term disability situation.

Disability means many things, both seen and unseen.

Where do I get Disability Insurance in Canada?

There are a few different ways to get disability insurance in Canada. You can easily find disability insurance quotes through an insurance broker, which would mean that you are buying an insurance policy privately – sort of like how you buy and pay for your car insurance on a monthly basis. Lots of people are insured this way.

Another option is to review your group benefits through your employer to see if it includes any disability insurance, and if so, how much. These policies may have financial caps or duration maximums, so review the fine print.

Banks and other creditors tend to offer disability insurance with the products they sell, like credit cards, loans, and mortgages. One important note on these products, however, is that this disability insurance only covers the product it is attached to. In other words, your disability insurance on your mortgage will cover your mortgage payments (usually for a limited time) but it will not put money in your pocket for your cost of living.

Can I get as Much Disability Insurance in Canada as I Want?

No. The maximum amount of coverage you can have is 85 per cent of whatever you were earning before you stopped working. The reason for this is to deter fraudulent claims. With that in mind, if you already have disability insurance in place, or know you have disability coverage from multiple sources, it is worthwhile to crunch the numbers and see how much coverage you have. If you have more than 85 per cent then you should scale back what you are carrying to reduce your expenses. Even if you over-insure intentionally, there are safeguards in place to ensure you do not receive more than 85 per cent. If you find you are not at your 85 per cent maximum, then you may want to reach out to your provider(s) to see if you can bump up your policy.

Don’t Take Chances

Accidents happen all the time, regardless of youth or fitness. With the spotlight on mental health we are seeing increased numbers of people reporting that they are living with a mental illness, and younger and younger people being impacted. That can count as a disability too. Don’t take your financial stability for granted. The cost of disability insurance is nothing compared to the peace of mind it will grant for you and your loved ones.