Long-term Disability insurance

Long-term disability (LTD) insurance provides income replacement if you are unable to work for an extended period due to illness or injury. It ensures financial stability by paying a percentage of your regular income, typically between 60 and 85 percent, after you have been disabled for a specific waiting period known as the elimination period. LTD benefits continue until you recover, reach a set benefit end date, or reach retirement age, depending on the terms of the policy.

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This type of insurance is especially important for protecting your ability to earn a living and maintain your financial obligations, such as rent, mortgage payments, and everyday expenses. Coverage can be provided through an employer’s group benefits plan or purchased individually. Group plans usually define disability as the inability to perform your own occupation for a certain period, after which the definition may change to any occupation you are reasonably suited for.

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Example:

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If you earn $6,000 per month and become unable to work due to a back injury, your long-term disability policy with 70 percent coverage would pay $4,200 per month after a 90-day elimination period, continuing for as long as you remain disabled under the policy definition.

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What to Watch For:

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Review how your policy defines disability, as this determines when and for how long benefits are payable. Check whether benefits are taxable, which depends on who pays the premiums. Understand how offsets work, as other income sources such as Canada Pension Plan Disability (CPP-D) may reduce the LTD amount you receive.