Disability insurance in Canada is one of the most important types of insurance to have. It protects you and your family financially in the event of an accident or serious illness that prevents you from working and generating income. The assistance of a disability insurance lawyer is necessary to understand how an insurance plan works and to obtain the disability benefit to which you are entitled.
What is disability insurance?
Disability Insurance (DI) is a benefit paid by employers to their employees in the event that they become unable to work due to illness or injury.
Disability insurance can be provided through an employer’s group plan or through an individual policy. It is specifically designed for workers and allows you to receive tax-free monthly benefits to replace a portion of your income in the event of disability.
What is the meaning of “disability”?
There is some variation among insurance policies in the definition of disability. For example, there are two separate definitions for sick or injured:
- Be unable to perform all the duties of his/her regular job;
- Be unable to perform the duties of a job for which he or she is qualified, or for a job for which he or she is likely to become qualified given his or her training, education and experience.
A disability insurance lawyer can explain how these differences affect your disability insurance policy.
What is the waiting period?
The waiting period is the period between the beginning of the compensation and the beginning of the disability. It varies between 1 month and 12 months. Your insurance company must mention this period in the insurance contract.
What are the types of disability insurance?
There are two types of disability insurance: short-term disability insurance and long-term disability insurance.
Short-Term Disability Insurance
Short-term disability insurance is often available as part of the group insurance plan offered by your employer. If you are unable to work due to a physical or mental illness or injury, disability insurance provides coverage for up to 6 months. The maximum monthly benefit for short-term disability insurance is up to 70% of your usual income.
If your employer has a short-term disability plan, your insurance claim must be submitted under that plan. Check with Human Resources for details on sick leave and vacation time.
If your employer does not provide you with short-term disability insurance, you can access Employment Insurance (EI) sickness benefits. The eligibility requirements are:
- Use of your sick leave;
- Have worked a sufficient number of hours.
Employment Insurance sickness benefits can provide you with up to 15 weeks of financial assistance if you are unable to work for medical reasons (illness, injury, quarantine, etc.). You can receive 55% of your income up to a maximum of $638 per week.
Long-Term Disability Insurance
Long-term disability benefits become effective when the following benefits end:
- Short-term disability insurance benefits;
- Employer leave credits;
- Employment Insurance benefits.
Long-term disability insurance plans replace between 60% and 70% of your regular income. The period of coverage varies from one insurer to another. It can exceed 2 years if you are still unable to work and can go up to age 65.
Long-term disability insurance may also be offered by your employer. However, you should discuss it with your employer to ensure that it meets your needs. Some policies waive disability insurance premiums if the insured becomes totally disabled. This waiver is available at an additional cost. You should check the restrictions and exclusions that may apply.
Group or individual disability insurance
Depending on the policyholder, disability insurance can be grouped or individual:
- Group disability insurance: offered to all employees of a company or members of a professional association. This insurance is often mandatory, and you do not have the right to choose your coverage.
- Individual disability insurance: acquired by a single person, who may be an employee or self-employed.
Here is a comparison chart between group disability insurance and individual disability insurance:
| Group Insurance | Individual Insurance | |
|---|---|---|
| Protection amount | Often limited | At your choice |
| Choice of protection | It is often the employer who chooses the coverage options | You choose the options and the duration of the insurance contract |
| Modification of the protection | Possibility to modify your coverage once a year or when you encounter a major event | You can make changes to your coverage |
| End of collaboration with your employer | Coverage ends, unless you take advantage of the option that converts your group insurance to individual coverage | Your coverage is independent of your job |
| Cost | Low | Higher than group insurance |
| Change in cost | May change annually | Remains the same for the duration of the policy |
Who is eligible for disability insurance?
All employees and self-employed persons in Canada can apply for disability insurance from a private insurer. However, you must meet certain conditions to receive government disability benefits.
Canada Pension Plan (CPP) disability benefits
You may receive monthly CPP disability benefits if:
- You contribute to the CPP for a certain number of years;
- You are under the age of 65;
- You have a severe and prolonged physical or mental disability;
- Your disability prevents you from working on a regular basis.
The Quebec Pension Plan (QPP) is a program similar to the CPP for residents of Quebec. The same eligibility requirements apply with the addition that you are not entitled to unreduced income replacement benefits from the Commission des normes, de l’équité, de la santé et de la sécurité du travail (CNESST).
Other public disability plans
- Commission des normes, de l’équité, de la santé et de la sécurité du travail (CNESST): in case of disability caused by a work accident;
- Société de l’assurance automobile du Québec (SAAQ): whether you are at fault or not, you are automatically covered by the SAAQ in case of injury or death in a road accident.
Your insurance company may coordinate its benefits with these plans. This means that your company sets the amount it pays based on what you already receive from the public plans.
How do I make a claim against my insurance company?
Why is it important to have disability insurance?
A widespread situation
Studies show that 40% of Canadians experience a disability episode of 3 months or more as a result of illness or injury before they reach age 65. When the disability exceeds 90 days, the average duration is 6 years.
Disability not only prevents income generation, it can also result in additional costs such as:
- Medical expenses;
- Costs associated with home care;
- Costs associated with adapting the home (e.g., building wheelchair ramps).
Replace a good part of your salary
Purchasing disability insurance is a sure way to reduce the impact of lost income and maintain a normal standard of living for you and your family. For example, if your annual income is $50,000, you may be eligible for a monthly benefit of $2,975, or an annual income of $36,000.
Protecting your retirement savings
Disability insurance can help you meet your financial obligations and avoid depleting your retirement savings.
Is disability insurance taxable?
Generally, if you pay the full premium for disability insurance yourself, your disability benefits are tax-free. This means that you receive an income close to your regular salary. However, if your union, association or employer pays some or all of the premiums, you must pay tax on the benefits received during the period of disability.
How does disability insurance work?
- Choose the amount of coverage and add optional features;
- Pay the monthly insurance premium;
- Submit a disability claim;
- Receive monthly benefits at the end of the waiting period;
- Payments cease at the end of your benefit period or when you return to work.
How much does disability insurance cost?
Most disability insurance premiums range from 1% to 9% of your usual income.
Here are some factors that affect the price of your insurance policy:
- The amount of coverage: The higher the amount of coverage desired, the more expensive the cost of the insurance.
- The indemnity period: The longer the indemnity period, the more expensive the price of the coverage.
- Waiting period: The longer you wait for payments, the lower the cost of premiums.
- Age: Disability insurance costs more as you get older.
- Health status: The healthier you are, the lower the cost of insurance.
- Occupation: If you work in an occupation with a high risk of work-related accidents (farmer, roofer, tree trimmer, metal worker, miner, etc.), the more expensive the insurance premium will be.
What to do after a work accident?
What to do if you are not satisfied?
If you are not receiving the disability benefits you think you are entitled to, you can do the following:
- Contact your insurance company to resolve the situation directly with them;
- File a complaint with the Autorité des marchés financiers;
- Mandate an insurance lawyer to initiate legal proceedings.
Need a disability insurance lawyer?
In order to build a relevant disability file and assert your rights in the event of a dispute with your insurer or employer, it is important to hire a lawyer who is familiar with the legislative and regulatory framework of this type of insurance (disability insurance, life insurance, health insurance, annuity insurance, etc.). Accident Solution offers you personalized support and rigorous representation before the courts in Quebec.
