Insurance

Disability Insurance

Disability insurance can replace part of your income if illness or injury prevents you from working, subject to the policy terms.

4 min

Insurance 101 • 09

Disability insurance protects income.

It can pay benefits when illness or injury prevents you from working under the policy’s definition of disability.

Your ability to earn can be one of your largest financial assets.

Losing income for months or years can affect housing, debt payments, saving and everyday spending.

Disability policies can differ by

01How disability is defined02Waiting period before benefits03How long benefits can last04Percentage of income replaced05Tax treatment of benefits06Other benefits that offset payments

Short-term and long-term coverage solve different periods.

Short-term disability

Typically covers a shorter period after illness or injury.

Long-term disability

Can begin later and continue for a longer period, subject to the plan.

Coverage usually replaces only part of income.

Normal income100%

Typical replacementOften 60% to 85% depending on plan

Maximum benefitPolicy-specific

TaxesDepend partly on who paid the premiums

Employer coverage may already protect part of your income.

Check workplace benefits before buying separate coverage so you understand what you already have and where gaps remain.

Before relying on disability coverage, know

01Monthly benefit02Waiting period03Benefit period04Definition of disability05Tax treatment06Offsets with other benefits

Remember this

Disability insurance protects the paycheque your life depends on.

Understand exactly when the policy considers you disabled and what income it would replace.

Lesson complete

Reviewed 2026-08-18

Sources

Financial Consumer Agency of CanadaDisability insurance ↗

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