Why Get Disability Insurance? The Case for Protecting Your Income in Canada
Most Canadians insure their car, their home, and their life. Far fewer insure the one asset that makes all of those other things possible: their income. That's exactly what disability insurance does—and understanding why you need it could be one of the most important financial conversations you have this year.
The odds of experiencing a disability during your working years are higher than most people expect. According to the Canadian Life and Health Insurance Association, one in three Canadians will experience a disability lasting 90 days or more at some point before retirement. Yet income protection remains one of the most overlooked areas of personal financial planning.
This guide makes the case for disability insurance clearly and practically—covering what it protects, who needs it most, and why waiting to get it is a risk most Canadians can't actually afford to take.
Key Takeaways
Disability insurance replaces a portion of your income—typically 60% to 85%—if illness or injury prevents you from working.
The risk of disability during your working years is statistically significant and often underestimated.
Government programs provide limited support that rarely covers the full cost of living for most working Canadians.
Self-employed individuals and business owners carry the greatest personal financial exposure without coverage.
The right time to get disability insurance is before you need it—premiums rise with age and health changes.
A licensed advisor helps you structure coverage that fits your actual income, occupation, and financial obligations.
Overview
This guide answers the question of why you should get disability insurance by walking through the real financial risks of disability, the limitations of government programs, the difference between group and individual coverage, and who stands to benefit most. We cover common misconceptions, premium considerations, and what proper coverage actually looks like. Athena Financial Inc. helps individuals and business owners across Ontario and British Columbia build income protection strategies that hold up when it matters most.
What Disability Insurance Actually Does
Disability insurance pays you a monthly benefit—typically 60% to 85% of your pre-disability income—if you become unable to work due to illness or injury. Depending on how your policy is structured, it can replace income for a few years or all the way to age 65.
The benefit isn't just about covering basic expenses. It's about maintaining financial stability across every area of your life:
Mortgage or rent payments
Groceries and household bills
Loan and debt repayments
Retirement savings contributions
Childcare and education costs
Business expenses for self-employed individuals
Without disability insurance, a prolonged absence from work doesn't just affect your current cash flow—it can derail years of financial progress in a matter of months.
The Real Probability of Disability
One of the most common reasons Canadians skip disability insurance is the belief that serious disability won't happen to them. The statistics tell a different story.
The Government of Canada reports that approximately 22% of Canadians aged 15 and over live with at least one disability. For working-age Canadians, the risk of experiencing a disability lasting longer than 90 days before retirement is substantial—and the majority of long-term disabilities stem not from workplace accidents but from illness: cancer, cardiovascular disease, mental health conditions, and musculoskeletal disorders.
These aren't rare or dramatic events. They're the kinds of health challenges that affect ordinary Canadians in every profession, at every income level. Disability insurance exists precisely because the risk is real, common, and financially devastating without protection.
Why Government Programs Aren't Enough
Many Canadians assume government programs will cover them if disability strikes. In reality, the available support falls well short of what most working Canadians need to maintain their lifestyle and financial obligations.
Employment Insurance (EI) Sickness Benefits provide up to 15 weeks of income replacement at 55% of insurable earnings—up to a maximum of approximately $668 per week in 2024. For a professional earning $90,000 annually, this represents a fraction of their income for a very short window.
Canada Pension Plan Disability (CPP-D) offers longer-term support, but the average monthly payment is approximately $1,100—a figure that covers basic expenses for few Canadians, and which requires a lengthy application and approval process during which no income flows.
Workers' Compensation applies only to workplace injuries, leaving the vast majority of disabilities—those caused by illness—entirely outside its scope.
The gap between what government programs provide and what most Canadians actually need is where disability insurance does its most critical work. Understanding what disability insurance covers and how it works makes that gap immediately clear.
Why Self-Employed Canadians Need It Most
If you're self-employed, disability insurance isn't just important—it's arguably your most critical financial protection. Here's why.
Employees often have access to employer-sponsored group disability plans, EI sickness benefits, and potentially workers' compensation. Self-employed individuals access none of these automatically. When a self-employed professional can't work, income stops—and business expenses often don't.
Consider a self-employed consultant earning $120,000 per year. A six-month disability with no coverage means:
Zero income for six months
Ongoing business overhead—software, professional fees, office costs
Personal living expenses continuing uninterrupted
Retirement contributions halted
Emergency savings depleted
The financial damage from even a moderate disability can take years to recover from. Disability insurance replaces the income that keeps everything else intact.
For incorporated business owners, there are additional structural considerations around how disability coverage is owned and how premiums are treated for tax purposes—making professional advice especially important. The Ontario disability insurance guide walks through key coverage considerations for self-employed and incorporated professionals.
Group Coverage Is Not a Complete Solution
Many employed Canadians believe their employer's group disability plan fully protects them. Group coverage provides a valuable foundation, but it has meaningful limitations worth understanding:
Benefit caps: Group plans often cap monthly benefits at a fixed dollar amount that may not reflect your actual income.
Definition of disability: Some group policies use a stricter definition that requires total inability to perform any occupation—not just your own.
Taxable benefits: If your employer pays the premiums, your disability benefits are taxable income, reducing what you actually receive.
Coverage ends with employment: Group coverage disappears the moment you leave, change jobs, or your employer changes plans—often at the worst possible time.
Limited portability: Converting group coverage to an individual policy after leaving an employer typically involves health underwriting and may not be possible at all.
Supplementing group coverage with a personal individual policy addresses all of these gaps and gives you coverage that travels with you regardless of where you work. The taxable vs. tax-free disability insurance breakdown clarifies exactly how benefit taxation affects your real take-home income during a claim.
The Cost of Waiting
Disability insurance premiums are based on three main factors: your age, your health, and your occupation. All three tend to work against you the longer you wait.
Age: Premiums increase as you get older. Locking in coverage early means paying less over your working lifetime.
Health: A new health condition—even a minor one—can raise your premiums, add exclusions to your policy, or make you uninsurable altogether.
Occupation changes: Moving into a higher-risk or physically demanding occupation later in your career can limit the coverage available to you.
The Canadians who have the hardest time getting disability insurance are often the ones who need it most: those who waited until a health event made it expensive or impossible to qualify. Getting coverage while you're young and healthy isn't just financially smart—it's the only window where you have full access to the broadest coverage at the most affordable rates.
Many disability insurance myths revolve around assumptions that coverage isn't necessary or affordable—assumptions that tend to collapse quickly when examined against actual premium costs relative to income protection value.
What Good Disability Coverage Looks Like
Not all disability policies provide equal protection. Understanding what to look for helps you evaluate whether a policy actually covers you the way you expect.
Key features to prioritize:
Own-occupation definition: The gold standard. Pays benefits if you can't perform the duties of your specific occupation, even if you could theoretically work in a different field.
Non-cancellable and guaranteed renewable: The insurer cannot cancel your policy or raise your premiums as long as you pay them, regardless of health changes.
Benefit period: Coverage to age 65 provides the most comprehensive long-term protection. Shorter benefit periods leave gaps for longer-term disabilities.
Elimination period: The waiting period before benefits begin—typically 30, 60, or 90 days. Longer elimination periods lower your premium but require more emergency savings to bridge.
Cost of living adjustment (COLA): Increases your benefit annually in line with inflation, so your purchasing power doesn't erode over a long claim.
Partial disability benefit: Pays a proportional benefit if you can return to work part-time but haven't fully recovered.
Understanding how much disability insurance coverage you actually need helps you match these features to your income, obligations, and risk profile.
Disability Insurance and Your Broader Financial Plan
Disability insurance doesn't operate in isolation—it protects every other element of your financial plan. Without it, a disability can unravel years of careful saving and investing.
Consider what happens to your retirement plan when income stops for 12 months:
RRSP contributions halt
TFSA contributions halt
Non-registered investments may need to be liquidated to cover living expenses
Compound growth is interrupted—permanently reducing your retirement nest egg
Disability insurance keeps your financial plan intact during a period when you physically cannot contribute to it. It acts as a bridge that preserves the progress you've already made.
For those who also hold whole life insurance as part of their financial strategy, disability coverage complements permanent insurance by addressing the living risk—the financial impact of being unable to work—while the life policy addresses the death risk. Together, they form a complete income and estate protection framework.
Speak With Athena Financial Inc. About Your Income Protection
If you don't have disability insurance—or haven't reviewed your coverage recently—now is the right time to act. Athena Financial Inc. works with individuals, professionals, and business owners across Ontario and British Columbia to build disability coverage strategies that protect real income, not just a policy number on paper.
Our licensed advisors assess your income, obligations, existing coverage, and tax situation to recommend coverage that fits your life—and stays with you regardless of where your career takes you.
📍 Serving Ontario and British Columbia, CA 📞 +1 604-618-7365
Contact us today to review your income protection and confirm your financial plan is covered from every angle.
Conclusion
The question isn't really whether you can afford disability insurance—it's whether you can afford to go without it. Your income is the engine of your entire financial plan. It funds your mortgage, your retirement savings, your family's lifestyle, and your long-term goals. Disability insurance protects that engine when illness or injury takes it offline.
Government programs provide minimal support. Group plans carry limitations. And the longer you wait, the more expensive and difficult coverage becomes to obtain. The strongest financial plans treat disability insurance not as an optional extra but as a foundational layer of protection—one that keeps everything else intact when life doesn't go as planned.
Athena Financial Inc. helps Canadians across Ontario and British Columbia build income protection strategies that reflect their real financial lives. If you're ready to find out why disability insurance belongs in your plan—and exactly what coverage you need—call us at +1 604-618-7365 today. Protecting your income now means protecting everything you're building for the future.
FAQs
Q: Why should I get disability insurance if I'm young and healthy?
A: Being young and healthy is actually the best reason to get disability insurance—not a reason to delay. Premiums are lowest when you're young, and your health status today determines your eligibility and rates for life. A health event tomorrow could make coverage significantly more expensive or exclude certain conditions entirely. Locking in coverage early gives you the broadest protection at the most affordable cost.
Q: Why isn't EI sickness coverage enough if I become disabled?
A: EI sickness benefits cover only 15 weeks at 55% of insurable earnings, with a weekly cap that falls well below what most working Canadians earn. For anyone with a mortgage, dependents, or significant financial obligations, 15 weeks of partial income is not a financial safety net—it's a very short bridge. Disability insurance provides coverage that lasts months or years, depending on your policy terms.
Q: Why do self-employed Canadians need disability insurance more than employees?
A: Self-employed individuals have no employer group plan, no access to EI sickness benefits, and no workers' compensation coverage. When income stops, it stops completely—while business expenses and personal obligations continue. Disability insurance is the only mechanism a self-employed Canadian has to replace lost income during a period of illness or injury, making it a foundational financial protection rather than an optional add-on.
Q: Why does the definition of disability matter when choosing a policy?
A: The definition determines when and whether you actually receive benefits. An "own-occupation" definition pays if you can't perform your specific job—even if you could theoretically work in a different role. A broader "any occupation" definition requires that you be unable to work in virtually any capacity before benefits are paid. For professionals and specialized workers, the own-occupation definition provides far more meaningful protection.
Q: Why might my group disability plan not be sufficient on its own?
A: Group plans often have benefit caps, taxable payouts, strict disability definitions, and coverage that disappears when you change employers. They provide a useful baseline but rarely replace your full income or travel with you throughout your career. A personal individual policy supplements group coverage with portable, tax-advantaged protection that reflects your actual income and remains in force regardless of your employment situation.
Q: Why do disability insurance premiums increase with age?
A: Disability risk increases with age, and insurers price premiums to reflect that risk. A 30-year-old purchasing disability coverage pays significantly less than a 45-year-old with the same coverage amount, because the insurer carries a lower statistical risk of claim over the policy period. Purchasing coverage early locks in lower rates and protects against future health changes that could raise premiums or limit eligibility.
Q: Why is disability insurance important for business owners specifically?
A: Business owners face layered financial risk during a disability—personal income stops while corporate obligations, loan repayments, staff payroll, and operating costs may continue. Disability insurance for business owners needs to address both personal income replacement and potential business overhead coverage. Without both layers, a disability can threaten not just personal finances but the viability of the business itself.
Q: Why is the elimination period an important feature to understand?
A: The elimination period is the waiting time between when your disability begins and when benefits start—typically 30, 60, or 90 days. A longer elimination period reduces your premium but requires you to cover living expenses out of pocket during that window. Choosing the right elimination period means balancing your emergency savings against your premium budget—a calculation a licensed advisor can help you model accurately.
Q: Why does disability insurance protect my retirement savings?
A: When income stops during a disability, RRSP and TFSA contributions halt—and existing savings may need to be liquidated to cover living expenses. Interrupting compound growth, even for one year, can reduce your retirement nest egg by a meaningful amount over a 20 or 30-year horizon. Disability insurance keeps contributions intact and prevents forced liquidation of investments during a period when you cannot earn income.
Q: Why should I review my disability coverage even if I already have a policy?
A: Income grows, debts change, dependents are added, and business situations evolve. A policy you purchased five years ago may no longer reflect your current financial obligations or income level. Coverage shortfalls often go unnoticed until a claim is filed—at which point adjusting the policy is no longer possible. Regular reviews with a licensed advisor confirm your coverage remains aligned with your real financial picture.