Disability Insurance in Canada 2025: Short and Long-Term

Updated: March 2025 · bremo.io

Disability insurance protects your income if you become unable to work due to illness or injury. It is arguably the most important — and most overlooked — form of insurance for working Canadians. Statistics show that one in three workers will experience a disability lasting 90 days or more during their career. Without disability insurance, a serious illness or accident could mean financial devastation.

Types of Disability Insurance in Canada

Short-Term Disability (STD)

Short-term disability insurance replaces a portion of your income for a short period — typically 17 weeks to 26 weeks (sometimes up to 52 weeks). It kicks in after a brief elimination period, often tied to how long your sick leave lasts (e.g., after 1–2 weeks of sick pay).

• Benefit amount: typically 55–80% of pre-disability earnings
• Waiting/elimination period: 0–14 days (or after sick days are exhausted)
• Benefit duration: up to 17–52 weeks
• Most commonly provided through employer group plans

Long-Term Disability (LTD)

Long-term disability picks up where STD ends. It's designed to protect income for extended periods — years or until age 65. LTD is the most critical disability coverage for serious illnesses like cancer, heart disease, or severe mental health conditions that keep you off work for months or years.

• Benefit amount: typically 60–70% of pre-disability income
• Waiting/elimination period: 90–180 days (aligned with when STD ends)
• Benefit duration: 2 years, 5 years, or to age 65
• Definition of disability changes after 2 years: "own occupation" becomes "any occupation" in many plans

The Own Occupation vs. Any Occupation Distinction

This is one of the most critical distinctions in disability insurance:

• Own occupation: You are disabled if you cannot perform the duties of your specific occupation. A surgeon who loses fine motor skills is considered disabled even if they could work a desk job.
• Any occupation: You are only disabled if you cannot perform any work for which you are reasonably suited by education, training, and experience. This is a much harder standard to meet.

Most group LTD plans switch from own-occupation to any-occupation after 24 months. Individual disability policies for professionals can be purchased with a permanent own-occupation definition — highly valuable for physicians, dentists, lawyers, and other specialists.

Government Disability Benefits

Employment Insurance (EI) Sickness Benefits

EI provides sickness benefits for up to 26 weeks for employed Canadians who have accumulated sufficient insurable hours. The benefit is 55% of average insurable weekly earnings, up to a maximum ($668/week in 2025). You must have a medical certificate confirming you cannot work.

CPP Disability Benefits

Canada Pension Plan Disability provides monthly payments to CPP contributors who have a severe and prolonged disability. To qualify:

• You must have contributed to CPP for 4 of the last 6 years (or 3 of the last 6 in some circumstances)
• Your disability must be severe (cannot regularly pursue substantially gainful employment) and prolonged (indefinite duration or likely to result in death)
• Average CPP disability benefit: ~$1,100/month in 2025; maximum ~$1,600/month
• The application process is lengthy, and many claims are initially denied and require appeal

Provincial Disability Assistance

Each province has a disability assistance program for residents who cannot support themselves and do not qualify for CPP Disability. Benefits are low (often $1,000–$1,500/month) and designed as a safety net. Programs include Ontario Disability Support Program (ODSP), BC Disability Assistance, Alberta AISH, etc.

Employer Group Disability Plans

Most medium and large employers provide group STD and LTD as part of their benefits package. Group disability benefits are pooled risk, making them less expensive than individual plans. However:

• Group LTD often covers only 60–66.7% of base salary (bonuses, commissions often excluded)
• Benefits may be reduced by CPP Disability or other income sources
• Coverage ends when you leave the employer
• Group plan definitions are often less favourable than individual policies

Individual Disability Insurance

Self-employed Canadians, professionals, and those wanting stronger coverage than their group plan provides should consider individual disability policies. Individual policies:

• Are portable (not tied to your employer)
• Can have non-cancellable and guaranteed renewable provisions
• Allow own-occupation definitions to be locked in
• Are more expensive than group coverage — typically 2–4% of annual income for a policy to age 65
• Benefits are tax-free if you pay the premiums personally

Taxation of Disability Benefits

How Much Disability Insurance Do You Need?

Financial planners generally recommend disability coverage of 60–70% of gross income. Consider:

• Your fixed monthly expenses (mortgage, car, food, utilities)
• How long your emergency fund would last (affects the elimination period you choose)
• Whether a spouse or partner has income that could support the household
• Government benefits you'd receive (EI, CPP)
• The tax treatment of your benefits