Disability Insurance
Why Disability Insurance in Canada Should Be a Financial Priority — Especially for the Young
When we think about protecting our future, we often consider saving for retirement, purchasing life insurance, or establishing an emergency fund. But there’s one crucial piece missing from many Canadians’ financial safety nets — disability insurance.
The Hidden Risk: What Happens If You Become Disabled?
A disability — whether from illness or injury — Unexpected events can occur at any time, potentially leaving you unable to earn an income. In fact, according to the Canadian Life and Health Insurance Association (CLHIA), 1 in 3 working Canadians will face a disability lasting over 90 days before turning 65.
That’s not just a health crisis — it’s a financial one.
Imagine your income suddenly disappearing for months or years. Mortgage or rent payments still need to be made. Groceries, utilities, and loan payments don’t stop. And if you’re young, such as in your 20s or 30s, the impact could last for decades.
Future Earnings Lost Due to a Long-Term Disability
Here’s a simplified example to illustrate the cost of losing your income due to a permanent disability starting at different ages. We assume a starting annual income of $60,000 at age 25, increasing 2% annually (a modest average salary growth). These are pre-tax earnings that would no longer be earned if the individual became disabled and could no longer work.
| Age at Disability | Years Lost (to age 65) | Total Future Income Lost (2% growth/year) |
| 25 | 40 | $3,749,173 |
| 35 | 30 | $2,579,114 |
| 45 | 20 | $1,557,025 |
| 55 | 10 | $747,682 |
These projections are conservative and don’t include inflation or investment growth — meaning the real loss is even greater.
The Emotional and Mental Toll
The financial impact of a disability is only part of the story. The sudden shift from independence to dependence can have profound emotional consequences:
- Stress and anxiety over unpaid bills
- Loss of identity if one’s career is central to their self-worth
- Relationship strain due to financial pressure
When you have disability insurance, you’re not just protecting income — you’re safeguarding peace of mind, dignity, and stability.
What Is Disability Insurance?
Disability insurance provides a monthly income replacement If you are unable to work because of illness or injury. It can be purchased individually or offered through employer benefit plans.
Key Features of Individual Disability Insurance:
- Replaces 60% to 85% of your income (tax-free if premiums are paid personally)
- Short-term and long-term coverage options
- Customizable waiting and benefit periods
- Pays benefits even if you're not hospitalized, as long as you can't work
What Are the Alternatives?
Many Canadians assume that government programs will take care of them. Here’s a breakdown:
| Program | Description | Weaknesses |
| EI Sickness Benefits | Pays up to 55% of earnings for 15 weeks | Very short duration; limited to 15 weeks |
| CPP Disability | For those under 65 with a severe and prolonged disability | Hard to qualify; strict definition of disability |
| Workers’ Compensation | Covers work-related injuries | Only if the disability happened on the job |
| Employer Group Plans | Often included in employee benefits | May be insufficient and not portable if you change jobs |
None of these programs offer the comprehensive, long-term coverage that individual disability insurance provides.
Why Buy It While You're Young
If you're in your 20s or early 30s, disability insurance is cheaper and easier to qualify for when you're healthy. As you age or develop health conditions, premiums rise, and coverage could be denied.
You insure your car and your home — why not your income? After all, your ability to earn is likely your biggest asset
Final Thoughts: Protect More Than Your Paycheque
Disability insurance is not just about money — it's about preserving your ability to live with independence, confidence, and peace of mind in the face of life's uncertainties.
If you're self-employed, a gig worker, or your job doesn't offer long-term disability benefits, an individual disability policy is not a luxury — it's a necessity.