Insights & advice

How much disability insurance do I need?

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You work hard to protect what matters most to you. Like the car that takes you to work or the home that keeps your family safe. But what about protecting one of your most important assets – your income.

Some of the most important things in life – our families, our lifestyles – depend on a steady source of money.

What is the cost of lost income?

Many Canadians put assets like their vehicles and homes first when it comes to getting insurance. But the cost of these things being affected by fire, theft or flood might not seem as bad compared to the financial challenges that come with losing your income due to a disability.

Over the long run, that could add up to a lot of lost wages. Not accounting for inflation, if you earn about $50,000 annually you would make approximately $1.5 million over the course of a 30-year career – a significant amount of money for a family. That number doesn’t even account for increases in salary, which means that total could be even higher for some.

A disability can also come with additional costs, such as making your home more accessible, paying for in-home care or taking more prescription medications.

How likely are you to experience a disability?

Although people don’t like to think about it, having a disability is more common than you might think. A quarter of Canadians will be unable to work due to an injury or illness for 90 days before the age of 65. If the disability lasts longer, its average length is almost 6 years.1

Government programs like the Canada Pension Plan Opens a new website in a new window    - Opens in a new window (CPP) and Workers’ Compensation can help, but you’ll need to meet certain conditions to qualify .

CPP benefits only cover disabilities that are severe and prolonged enough to prevent you from working any kind of job, not just the job you had. Meanwhile, Workers’Compensation only covers disabilities caused by workplace incidents.

How much can you receive through disability insurance?

Disability insurance can help you and your family pay for necessary expenses like your mortgage, car payments, utilities and groceries.

If you earn $50,000 per year you may be eligible to receive a monthly benefit of $2,975, giving you a take-home pay of nearly $36,000. If you earn more, like $120,000, you could qualify for a monthly benefit of just under $6,000, giving you a take-home pay of $71,100.  

What if you already have disability insurance through work? 

Many Canadians have disability coverage from their employers, but it might not be enough to cover your lost income. It might be a good time to look at how much coverage you have through your employer.

1 Canadian Institute of Actuaries (CIA) 86-92 & 2012 Society of Actuaries – Individual Disability Experience Committee Table. These examples are for illustrative purposes only. Situations will vary according to specific circumstances. Actual amounts are subject to your age and occupation. Some limitations apply. This information is general in nature, and is intended for informational purposes only. For specific situations you should consult the appropriate legal, accounting or tax advisor.

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