Best Disability Insurance in Canada

Whether you are a salaried employee, small business owner, or self-employed, disability insurance policies is worth looking into. It replaces lost income if you’re unable to work due to illness or injury.

To help you pick the best insurance company, our experts reviewed the leading insurers in Canada, paying particular attention to disability coverage options, affordability, claim payout rates, and customer satisfaction.

Read on to find out which insurance providers came on top, but please remember to speak to an independent insurance advisor before deciding.

Alongside this research, we’ve provided some simple explanations about how disability insurance works, the main differences between short-term and long-term disability insurance in Canada, and key factors to consider when shopping for the best insurance plan.

What is Disability Insurance?

Disability insurance, also known as income protection, covers your income in the unfortunate event of you not being able to work due to an illness or injury. It provides financial support when you cannot work due to a qualifying disability. Insurance payments come directly to you, and you are free to use them any way you like — just like you would use your monthly paycheck.

To qualify for the benefits, you must meet your insurer’s definition of total disability and survive the specified waiting period. It is also referred to as the elimination period, which is the amount of time you must wait following a qualifying event before your disability coverage comes into effect.

For long-term disability insurance in Canada, the time is usually 30, 60, 90, 180, or 365 days. Unlike short-term disability insurance — which covers temporary injuries or illnesses — long-term disability plans provide coverage that can last anywhere from five years up to retirement.

How Disability Insurance Works

Disability insurance is designed to provide financial protection in the event of an unexpected illness or injury that prevents you from working and earning an income. Here’s how it typically works:

1. Purchase a Policy: You can buy an insurance plan either from an insurance company or through your employer. This policy outlines the terms and conditions of your coverage.
2. Pay Premiums: To maintain your income protection coverage, you need to pay regular premiums. These premiums are usually a percentage of your income.
3. File a Claim: If you become disabled and are unable to work, you need to file a claim with your insurance company. This involves providing medical documentation and other necessary information as part of the claim process.
4. Claim Review: The insurance company will review your claim to determine if you meet the eligibility criteria.
5. Receive Benefits: If your claim is approved, you will start receiving monthly benefit payments. These payments are typically a percentage of your pre-disability income.
6. Use of Benefits: The benefit payments you receive are tax-free and can be used to cover living expenses, medical bills, and other financial obligations.

By understanding how disability insurance works, you can better appreciate the importance of having a comprehensive income protection plan in place to safeguard your financial well-being.

Types of Disability Insurance

There are two main types of disability insurance in Canada: short-term disability insurance and long-term disability insurance. Each type serves a different purpose and offers unique benefits.

1. Short-Term Disability Insurance: This type of insurance provides benefits for a short period, usually up to six months. It is designed to cover temporary disabilities, such as a broken bone or a minor illness. Short-term disability insurance typically replaces a percentage of your weekly or monthly income, helping you make ends meet until you recover and can return to work.
2. Long-Term Disability Insurance: Long-term disability insurance provides benefits for a longer period, often up to age 65 or retirement. It is intended to cover more serious disabilities, such as a chronic illness or a permanent injury. Long-term disability insurance usually replaces a higher percentage of your pre-disability income and offers more comprehensive coverage, ensuring you have financial support for an extended period.

By understanding the differences between short-term and long-term disability insurance, you can choose the type of coverage that best suits your needs and provides the necessary financial protection.

Best Disability Insurance Companies in Canada

RBC, Canada Life, iA Financial Group, Humania Assurance, Desjardins, and Edge Benefits are among our top picks for the best disability insurance companies in Canada. We rated these providers on a wide range of key metrics, including, but not limited to, coverage options, affordability, optional features, ease of application, and consumer reviews. Financial stability is also a key metric used to evaluate insurance providers. Next, we categorized them based on the situations that excel the most.

Best for High-Dollar Coverage: Canada Life

Key Features

• Multiple plans to cover the needs of different people
• Option to extend the regular occupation disability standard to the entire benefit period
• A wide range of riders, including residual benefits, allows you to tailor coverage to your needs
• Guaranteed level rates to age 65
• Offers a higher maximum coverage amount than most insurance providers

Why We Picked Canada Life

Canada Life offers monthly disability benefits of up to $25,000, which is more than what most Canadian insurers offer. It also offers a regular occupation benefit extender for its flagship disability insurance plan, called the Lifestyle Protection Plan. Several riders are available, including residual and partial benefits, return of premium, cost of living, and future insurability.

Best for Coverage Options: Humania 

Key Features

• Six disability insurance options
• Income replacement without medical coverage amount
• No-medical debt insurance plans
• Affordable premiums
• Permanent disability insurance options
• Option to extend the regular occupation disability standard to the entire policy term

Why We Picked Humania

Humania has a disability insurance plan for anyone, including unemployed individuals, seasonal workers, students, individuals who have previously been declined standard disability insurance due to medical or other issues, and individuals who want permanent coverage. On top of all this, Humania offers two no-medical debt insurance plans for people who want to ensure they will be able to pay off existing debts in case of disability.

Best for Optional Benefits: Desjardins

Key Features

• Multiple income replacement coverages
• Option to extend the regular occupation for the entire benefit period
• A wide range of riders, including partial disability benefits, ensures you can customize the coverage to meet your unique needs
• The maximum monthly coverage amount of $10,000 is more than what many other insurers offer

Why We Picked Desjardins

Desjardins is one of the few Canadian insurers that offer applicants the option to extend the regular occupation definition of disability insurance policy (which pays benefits if you can’t perform your regular job, even if you can work in some other capacity). Other add-ons include the return of a premium rider, partial disability benefits, and a future insurability option.

Best for Small-business Owners & High-income Professionals: RBC

Key Features

• Offers monthly disability benefits up to $25,000
• Regular occupation for the entire benefit period
• Guaranteed level premiums up to age 65
• A wide range of riders, including a first-of-its-kind family compassionate care rider

Why We Picked RBC

RBC offers up to $25,000 in monthly disability benefits for high-income professionals and small business owners, ensuring they will receive sufficient financial assistance in case of disability. Throw into the mix guaranteed level premiums up to age 65 and regular occupation for the entire payout period, and you have disability insurance coverage that’s hard to beat. 

Best for Simplified Underwriting: The Edge Benefits

Key Features

• Many plan designs and customization options
• Simplified underwriting process
• Guaranteed issue injury coverage (with the option to add illness coverage) for those who have difficulty qualifying for medically underwritten disability insurance coverage
• Non-occupational coverage to complement compensation benefits offered by the employer

Why We Picked The Edge Benefits

The Edge Benefits, one of the leading disability insurance companies, offers a number of disability income replacement options, including simplified issue for illness coverage, guaranteed issue injury-only coverage, and comprehensive disability coverage for illnesses and injuries. In addition, it offers multiple benefit periods, waiting periods (including a 0-day elimination period), and coverage amounts to choose from.

Best for Long-term Care: iA Financial Group

Key Features

• Four disability insurance plans to meet the needs of different people
• Return of premium rider
• Option to pick a benefit period up to age 65
• The maximum monthly disability benefit is $10,000, which should be sufficient for most people

Why We Picked iA Financial Group

iA Financial Group offers a comprehensive disability insurance plan that provides protection up to age 65 with the option to extend regular occupation for the entire benefit period.

Disability insurance coverage

Disability insurance work covers almost every type of injury or illness that prevents you from earning a paycheck, including:

• Cancer
• Heart disease and heart attack
• Broken bones
• Muscle and joint disorders
• Back pain
• Chronic fatigue
• Nerve damage
• Lost limbs
• Depression

Typically, pre-existing conditions — illnesses or injuries you had before purchasing the insurance — are not covered. For instance, if you’ve been diagnosed with heart disease and then bought disability insurance, you cannot make a claim if it prevents you from working.

In most cases, you’ll likely be able to buy disability insurance with a pre-existing condition. However, your plan will not pay benefits if you have to take time off work due to your pre-existing condition.

Your policy also will not pay benefits in the event of self-inflicted injuries, injuries sustained while you were committing a crime, and injuries obtained in terrorism, civil unrest, or war.

Disability Insurance for Self-Employed Individuals

As a self-employed individual, you may not have access to group disability insurance through an employer. However, you can still purchase individual disability insurance to protect your income. Here are some options to consider:

1. Individual Disability Insurance Policies: These policies are specifically designed for self-employed individuals and can be customized to meet your specific needs and budget. They provide comprehensive coverage and ensure you have financial protection in case of a disability.
2. Business Overhead Expense Insurance: This type of insurance helps cover business expenses, such as rent and employee salaries, if you become disabled and are unable to work. It ensures that your business can continue to operate smoothly even in your absence.
3. Key Person Insurance: Key person insurance is designed to protect your business in the event of your disability or death. It provides financial support to help the business recover and continue operations without significant disruptions.

By exploring these options, self-employed individuals can find the right disability insurance policies to safeguard their income and business.

Group Benefits and Disability Insurance

Group disability insurance is often offered through employers as a benefit to employees. Here are some things to consider when evaluating group disability insurance:

1. Group Disability Insurance Policies: These policies are designed for groups of employees and provide a basic level of disability coverage. They offer financial protection in case of a disability, ensuring employees have some income replacement.
2. Customization Options: Some group disability insurance policies may offer customization options, such as additional coverage or riders, to meet individual needs. Employees can tailor their coverage to better suit their personal circumstances.
3. Cost: Group disability insurance premiums are often paid by the employer, but may also be shared with employees. This cost-sharing arrangement can make disability insurance more affordable for employees while still providing valuable coverage.

By understanding the benefits and options available with group disability insurance, employees can make informed decisions about their disability coverage.

Why buy disability insurance?

The prospect of being unable to work due to an injury or illness may seem remote, particularly if you have a desk job. But the risk of suffering a life-altering illness or injury is far greater than you think, and those with relatively safe jobs are not immune to becoming disabled. Research shows that one in three working Canadians will suffer a disability lasting longer than three months during their working years.

Your provincial or territorial health plan can help with the medical bills, but it won’t replace lost income. For that, you need disability insurance. It works when you can’t.

In addition, employment insurance (EI) can provide short-term financial support for those unable to work due to illness or injury.

Things to consider when applying for disability insurance

Everyone who relies on a paycheck should have disability benefit insurance. But with so many options available in the market, picking the right plan can be quite a hassle. Keep the following things in mind when applying for coverage to ensure it aligns with your long-term needs.

4. Review the policy features carefully, including the renewability provision, to understand how long the coverage will last and under what conditions it can be renewed.

Definition of disability

Most disability insurance policies have a two-tiered definition of total disability. For a certain period — usually the first two years — they follow the own-occupation standard. After which, the disability standard switches to any-occupation. There are also plans that exclusively follow either the own-occupation definition or the any-occupation definition.

Own-occupation plans are pricer than the other two types. However, it can be the right option for highly paid professionals such as doctors, architects, and lawyers.

Disability insurance policy with a two-tiered definition is a good choice for most people. It provides relatively comprehensive coverage at a reasonable premium.

Any-occupation disability insurance, in contrast, offers less protection than own-occupation or two-tiered plans. You may want to consider it if you want affordable coverage or if you are qualified to do different types of jobs.

Waiting period

Typically, the waiting period for long-term disability insurance plans is 90 or 180 days. However, you can potentially reduce or increase the waiting period, within certain limits, at the time of buying coverage. The right length of waiting period for you depends on how far you can support yourself without a paycheck. 

Benefit period

Do you want disability benefit payments until age 65? Or would you prefer a shorter benefit period in exchange for lower premiums? If you’re unsure, it might be best to go with a plan that pays until retirement, assuming you can afford it. 

Renewability provision

How long are you likely to need disability insurance protection? If you’re wondering, make sure your policy includes a renewability provision. 

The insurer cannot cancel a policy with a guaranteed renewable clause even if you develop health issues in the future. But what it can do is increase your premium every time the plan is renewed. 

If paying a higher premium at policy renewal doesn’t appeal to you, opt for a plan that includes both a renewability provision and a non-cancellable clause. The non-cancellable clause stipulates that the insurer cannot increase premiums, reduce the benefits, or cancel the plan during the policy's life.    

Riders

Some optional benefits worth considering are cost of living benefits, future increases, and residual benefits. But keep in mind that each rider you add will increase your monthly premium. 

Cost-of-living benefits increase the monthly payment annually to keep pace with inflation. 

The residual benefit rider ensures you will receive a portion of the disability benefits if you become partially disabled. 

The future increase rider allows you to buy more insurance in the future, regardless of any change in your health. It is a good fit for applicants whose income will likely increase considerably over time. 

How much does disability insurance cost?

As a general rule of thumb, the disability insurance cost typically ranges from 1% to 3% of your pre-disability annual income. So this gives you a rough estimate of how much you’ll pay before you start the process of getting an actual price quote.

There are several other factors that go into calculating disability insurance monthly premiums. This is why getting a personalized price quote is the best way to determine your premium rate. If you are considering disability insurance, it is important to compare prices of at least 3 to 5 carriers because premiums can vary significantly from one insurer to another.

Apart from your annual income, other factors that affect your rate are:

Age, medical history, and overall health

As is the case with life insurance, disability insurance rates increase with age. Pre-existing conditions will likely increase your monthly premium. You have a better chance of securing affordable long-term coverage while you are young and healthy. 

The benefit amount and the length of the benefit period

The higher the monthly benefit amount, the more you’ll pay for coverage. Likewise, selecting a longer benefit period will lead to higher premiums. On the upside, a higher benefit amount and a longer payout period mean more protection. Balancing your family’s future needs with what you can afford to pay today is a good idea. 

The length of the waiting period

The length of the waiting period is directly related to your premium rate. The longer the waiting period, the higher the premiums. 

Own-occupation vs. any-occupation

The definition of disability may vary from one insurer to another. Some plans follow the “own-occupation” definition, which pays disability benefits if you cannot perform the job you were engaged in before becoming disabled. Other plans offer “any-occupation” coverage, in which you qualify for disability benefits if your disability prevents you from working in any job suitable for you based on your education and experience.

Some policies have the “own-occupation” for the first two years. If you are still disabled after two years, the coverage changes to the “any-occupation” standard for the rest of the benefit period. These plans are cheaper than true “own-occupation” plans but slightly costlier than true “any-occupation” coverage. 

Smoking history

Smoking increases the risk of several life-threatening or life-altering diseases. So, if you smoke, expect a higher-than-average premium rate. 

Occupation and hobbies

A risky job or hobby makes it harder for you to qualify for affordable coverage. 

How to get disability insurance?

The best way to buy an individual disability insurance plan is to work with an independent insurance advisor who can connect you with various insurance companies. He or she can provide you with personalized, free quotes from multiple providers. Since premium rates vary by insurer, comparing quotes is the best way to secure affordable coverage.

Conclusion

The best disability insurance companies are essential for anyone who depends on their income. It provides you with a regular stream of income if you are unable to work and earn an income due to a disability. However, no two plans are the same, and ultimately the best disability insurance policy for you depends on your unique circumstances and budget.

At Dundas Life, our experts will walk you through the various options while offering unbiased, transparent advice. Reach out today.

FAQs

Can I get long-term disability for mental illness? 

Yes. If you have bought an individual long-term insurance plan, you may be eligible for disability benefits if you’re unable to work due to a mental illness. Most insurers will cover a range of psychiatric conditions, including bipolar disorder, depression, schizophrenia, and anxiety disorders. 

Is disability insurance taxable in Canada?

In most cases, disability insurance benefits are not taxable. 

What is the cost of disability insurance? 

As a general rule, disability insurance cost ranges from 1% to 3% of your annual salary.