Lucy Lukic on Why Disability Insurance Is No Longer Optional for Canadians
As more Canadians learn to live with income instability because of illness, injury, or mental health struggles, the need for reliable disability coverage is more urgent than ever. Even so, uptake remains relatively low, especially among self-employed and contract workers, despite the growing risks.
Roughly 27% of Canadians aged 15 and older reported having one or more disabilities in 2022, according to Statistics Canada. That number had soared since five years earlier and included a significant rise in disabilities linked to mental health challenges, chronic pain, and mobility issues. The shift has changed how insurers and employers think about disability protection.
“Disability insurance used to be treated as an optional add-on,” says Lucy Lukic, an insurance advisor in Hamilton, Ontario. “Now it’s becoming essential to any sound financial plan, especially for Canadians in their peak earning years.”
Many workplace policies provide group long-term disability benefits, which commonly replace 60% to 70% of the salary after a waiting period of 90 to 120 days. But the quality and uniformity of these policies diverge. For people without workplace coverage, or who are self-employed, individual policies are another option, albeit usually at a greater expense. Rates vary greatly based on occupation, age, health history, benefit amount, and riders, including cost-of-living adjustments and return-of-premium policy features.
Some Canadians report paying more than $500 per month for individual disability plans, especially if they work in higher-risk fields such as construction or creative freelance work. Even among white-collar workers, premiums can range from $300 to $400 per month for strong coverage. “The sticker shock turns people away. But they don’t always consider the financial consequences of being unable to work for several months or years,” says Lukic.
Research says one in three working Canadians experiences a period of disability longer than 90 days during their career. That reality makes long-term disability insurance more statistically relevant than most people realize. Yet only 50% of Canadians report having any form of disability coverage, and just a fraction of those are covered beyond employer plans.
The rise in mental health-related claims is also driving change in underwriting practices. In group plans, especially, insurers are seeing longer durations for stress, anxiety, and depression-related disabilities, sometimes surpassing claims from physical injuries. Some insurers have responded by introducing mental health-specific support programs or revising their definitions of total disability.
Education is a major barrier to better adoption. “People tend to believe disability means something catastrophic, like a car accident or major surgery. But the most common claims are from chronic conditions like back pain, burnout, or cancer treatments,” says Lukic.
She also notes that many Canadians assume government programs will cover them. The Canada Pension Plan (CPP) disability benefit, for example, is available only to those under 65 who meet strict criteria. In 2024, the average monthly CPP disability payment was just over $1,600. Ontario’s Disability Support Program (ODSP) provides even less and requires applicants to meet income and asset thresholds. Neither is intended to replace a regular salary.
Disability insurance can fill that gap, but only if Canadians are willing to engage with the details. Understanding elimination periods, benefit durations, residual coverage, and definitions of disability is critical. Advisors have a central role in helping clients navigate those terms.
Some innovation is underway. A few Canadian providers are experimenting with modular or digital-first offerings that simplify enrollment and reduce underwriting requirements. Others are integrating wellness incentives or mental health coverage enhancements into traditional disability plans. However, the industry has been slower to adapt than the life insurance space, where guaranteed issue and simplified term products are now common.
Public policy changes may also influence how Canadians think about disability coverage. The federal government’s new Canada Disability Benefit, which started in July 2025, will provide up to $2,400 per year for eligible low-income individuals. While this is a step forward, it falls far short of replacing employment income. Lukic sees this as an opportunity for greater collaboration. “Private insurers and public programs should complement each other. No single solution is going to protect a person fully,” she says.
As the workforce becomes more mobile, freelance, and mental health aware, insurers will likely face increased pressure to offer more flexible, accessible products. But without broader education, the protection gap will persist.
Pranab Bhandari is an Editor of the Financial Blog “Financebuzz”. Apart from writing informative financial articles for his blog, he is a regular contributor to many national and international publications namely Tweak Your Biz, Growth Rocks ETC.
