Key points
- Benefits generally replace 60% to 85% of your income, after a waiting period, up to a maximum.
- Short-term cover typically pays for up to about six months; long-term cover usually starts after that.
- The definition of disability (your own job or any job) shapes when a policy pays.
- If you pay the whole premium, benefits are generally tax-free; if an employer pays any part, they are taxable to that extent.
- Self-employed people usually have no group plan and only limited government cover.
What disability insurance pays
A disability policy pays a benefit while you can't work because of illness or injury, as the policy defines it. A few terms decide how useful it is in practice:
- Waiting period: how long you must be off work before benefits start, often weeks or months. A longer wait usually means a lower premium and a bigger call on your savings.
- Benefit period: how long benefits can last, from a few months to a set age.
- Definition of disability: some policies pay if you can't do your own job; others, often after two years, only if you can't do any job you are reasonably suited for.
- Offsets: many policies reduce the benefit by amounts you get from other sources, such as the CPP disability benefit or workers' compensation.
Our disability insurance guide goes through each term in more depth.
Who it usually suits
- Self-employed people and owner-managers, who have no employer plan. EI special benefits for the self-employed need an agreement made at least 12 months before a claim.
- Employees whose group plan is small or ends with the job.
- Anyone whose household relies on one income, or who carries a mortgage.
- Business owners with fixed costs that continue while they are away; for those costs see overhead insurance.
Government programs help but are limited: EI sickness benefits pay up to 26 weeks at 55% of insurable earnings to a weekly maximum, and the CPP disability benefit is for severe and prolonged disabilities. Our guide to the protection gap sets out what each pays.
Disability insurance and tax
| Who paid the premium | The benefits |
|---|---|
| You paid all of it, with after-tax money | Generally tax-free; the premium isn't deductible |
| Your employer paid all or part (a wage-loss replacement plan) | Generally taxable, less the premiums you paid yourself |
| Your corporation paid for a policy on you | Depends on how the policy and the plan are set up; ask before it is put in place |
For owner-managers this choice matters: a company-paid plan can mean taxable benefits later, a personally paid one means after-tax premiums now. Ask the agent: what exactly is covered and excluded, when the cover starts and ends, whether the premium can change, and what happens if you stop paying.
Where Finvo fits
We go through the tax side with you: who should own and pay for a disability policy, how the benefits would be reported, and how the premium fits your budget or your company's books. For staff plans we cover the payroll side.
Finvo itself does not sell insurance or give insurance advice. Finvo can connect you with a licensed insurance agent from our partner network who can help with insurance advice if you need it. The licensed agent advises on products and coverage; Finvo covers the tax side. Insurance and other specialists are joining Finvo as contractors, so a group of consultants can work on your file together and you don't have to go from place to place.
Whoever you deal with, you can check that an agent is licensed: in British Columbia with the Insurance Council of BC licensee directory, and in Alberta with the Alberta Insurance Council agent lookup.
This page is general information, checked against the sources below on 5 Nov 2026. Every policy and plan has its own terms; it isn't insurance, tax, investment or legal advice for your situation.