Disability Insurance Calculator in Canada

The monthly benefit you need, what your group plan really pays, and the gap between them

Your income and coverage

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Insurers rarely cover more than 60% to 70%, deliberately, so that being disabled never pays better than working.

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The monthly amount your employer's long-term disability plan would pay. Check the booklet, not your memory.

If your employer pays the premium, the benefit is taxable income. If you pay it yourself with after-tax dollars, the benefit is tax free.

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Used to work out what a taxable group benefit is actually worth.

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Rent or mortgage, food, utilities, transport, everything you must pay. The second test of whether coverage is enough.

How long the benefit would be paid. To age 65 is the strongest option.

Also called the elimination period: how long you must be disabled before payments start. A longer wait lowers the premium.

Monthly coverage gap
$2,775
What you would need to insure yourself
Monthly benefit you need
$4,875
65% of your $7,500 monthly income
Your group benefit, after tax
$2,100
Face amount $3,000, taxed at 30%

Monthly income, covered and uncovered

Your numbers

Monthly income$7,500.00
Target monthly benefit$4,875.00
Group benefit, face amount$3,000.00
Tax on the group benefit-$900.00
Group benefit you would actually receive$2,100.00
Gap to insure$2,775.00
Gap per year$33,300.00

Against your actual expenses

The income test asks what fraction of your salary you would keep. The expense test asks a blunter question: would the money cover the bills?

Monthly expenses$4,200.00
Group benefit you would actually receive$2,100.00
Shortfall against expenses$2,100.00

Your group benefit does not cover your stated monthly expenses. This is the more urgent of the two gaps.

What the benefit period is worth

The gap of $2,775 a month, paid over the benefit period you selected.

Benefit periodTo age 65
Total benefit over that period$832,500
Income you would go without during the waiting period$22,500

How disability insurance works in Canada

Disability insurance replaces part of your income if illness or injury stops you working. For most working people it protects a larger asset than life insurance does: their future earnings.

Why you cannot insure 100%

Insurers cap coverage at roughly 60% to 70% of gross income, and they do it on purpose. If a benefit fully replaced take-home pay, there would be no financial reason to return to work, so the industry builds in a deliberate shortfall. The 60% to 70% figure is less punishing than it sounds when the benefit is tax free. A tax-free $4,500 a month is worth about the same as a taxable $6,400 to someone in a 30% bracket. That is why the tax treatment matters more than the headline percentage.

The tax question that changes everything

Who pays the premium determines whether the benefit is taxed. If your employer pays the premium for a group long-term disability plan, the benefit is taxable income when you claim it. A $4,000 monthly benefit is worth $2,800 in your hand at a 30% marginal rate. If you pay the premium yourself with after-tax dollars, whether on an individual policy or by paying your share of a group plan, the benefit is entirely tax free. This is why some employers offer employees the option to pay the LTD premium themselves. It looks like a worse deal on the pay stub and is usually a much better one if you ever claim. The calculator above applies your marginal rate to a taxable benefit so the comparison is like for like.

The definition of disability is the whole policy

Two policies with the same monthly benefit can behave completely differently depending on how they define disability. Own occupation pays if you cannot perform the duties of your specific job, even if you could do some other work. It is the strongest definition and the most expensive. Regular occupation is similar but usually converts to a stricter test after two years. Any occupation pays only if you cannot perform any job you are reasonably suited to by education, training and experience. It is much cheaper and much harder to claim on. Many group plans use own occupation for the first two years and any occupation after that, which is the moment a lot of claims stop. Also check whether the policy is non-cancellable and guaranteed renewable, and whether the benefit is indexed to inflation. Over a claim that lasts to age 65, indexing matters enormously.

Where group coverage falls short

Group long-term disability is a real benefit and worth counting, but it has predictable weaknesses. It usually ends when the job ends, exactly when you might need it. It is often capped at a dollar maximum, so a high earner is replacing far less than the stated percentage. The definition of disability usually tightens after two years. And the employer can change or cancel the plan without your agreement. An individual policy costs more, follows you between jobs, has a definition that cannot be changed once issued, and pays tax free. For anyone whose household depends on their income, the usual advice is to treat group coverage as a foundation and buy an individual policy for the gap.

Assumptions

The target benefit is a straight percentage of gross monthly income. Insurers apply their own issue and participation limits and may offer less. A taxable group benefit is discounted by the single marginal rate you enter. A real claim would be taxed at whatever bracket the benefit alone puts you in, which is usually lower, so this is the conservative reading. CPP disability benefits, provincial programs and employment insurance sickness benefits are not included. They exist, they are modest, and they have their own eligibility tests. Treat any of them as an addition to the plan rather than a substitute.

Key terms to know

Disability InsuranceElimination PeriodBenefit PeriodCritical Illness InsuranceEI (Employment Insurance)Marginal Tax Rate

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Frequently Asked Questions

Last updated: July 2026

Enough to bring your after-tax monthly benefit up to roughly 60% to 70% of your income, after counting what your group plan actually pays. On $90,000 of income at a 65% target the benefit needed is $4,875 a month; if your employer-paid group plan pays $3,000 taxable, that is worth $2,100 after a 30% marginal rate, leaving a gap of $2,775 a month to insure yourself.

Insurers cap it deliberately. If a benefit fully replaced take-home pay there would be no financial reason to return to work, so the industry builds in a shortfall. The cap is less punishing than it sounds when the benefit is tax free: a tax-free $4,500 a month is worth about the same as a taxable $6,400 to someone in a 30% bracket.

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Educational tool - estimates only. Not individualized financial, investment, tax, or legal advice. Using it does not create an advisor-client relationship. Rules and figures change; verify against current CRA sources and consult a qualified professional. Editorial policy →