Disability insurance

Last updated: July 24, 2023

What is disability insurance?

Disability insurance (DI) helps protect you financially by replacing a portion of your income. You receive a benefit if you’re ever diagnosed with a covered medical illness, mental health issue, or injury that prevents you from working.

Disability insurance is a type of health insurance. Other types of health insurance include personal health insurance, critical illness insurance, and long-term care insurance. What makes disability insurance different from other health insurances is that it is insurance for your income and is linked to your ability to work. It can help you meet your financial obligations during your recovery until you can return to work.

How does disability insurance benefit you?

When you’re unable to work because of an illness or injury, your income stops – but your bills don’t. Disability insurance can help you cover your bills in the short and long term so that you can focus on managing your health and condition.

Getting an individual disability insurance policy can be beneficial for you even if you don’t work in a physically demanding role. As an example, if you are diagnosed with major depression that prevents you from working, your policy could replace a portion of your income while you focus on your mental health.

Types of disability insurance

There are different kinds of disability insurance coverage, including individual insurance plans, group insurance plans, as well as government plans such as worker’s compensation and benefits provided under the Canada Pension Plan.

Depending on the coverage you have, your policies or plans may also refer to your disability coverage as either ‘short-term disability (STD)’ or ‘long-term disability (LTD)’ plans.

The difference between STD and LTD is that STD benefits are paid out almost immediately after you are injured or diagnosed with an illness. LTD benefits, however, have longer waiting periods before benefits start, and are intended to maintain income replacement if your condition keeps you out of work past the end of your STD period.