Group Disability Insurance in Canada

According to Advocis, the Financial Advisors Association of Canada, over eight million Canadians have group disability insurance. With this type of disability policy, a whole group of people is covered, rather than just an indvidual – the bigger the group, the greater the sharing of risk.

There are no added features to group disability insurance and no individual assessment. The insurer will determine the premium rates based on the type of work the group does. They will also evaluate the claims, experience and age of those applying for coverage under the plan. The exact type of coverage is negotiated between the insurance carrier and the employer. Depending on the employer, they may offer short-term and long-term plans, but the majority just offer long-term plans. Group rates are typically negotiated on an annual basis and usually increase depending on the number of claims in the previous year.

After the first two years, the definition of disability often changes to mean that the insured cannot work in “any” occupation. Therefore, if you are a computer consultant and your disability prevents you from working your regular occupation, but you can still work as a checkout clerk at a grocery store, you will not receive a cent.

In group disability plans, there is usually a clause that will cover the insured for the first two years they are unable to work in their chosen occupation classification. This is called a “regular” occupation. However, after the first two years, the definition of disability often changes to mean that the insured cannot work in “any” occupation. Therefore, if you are a computer consultant and your disability prevents you from working your regular occupation, but you can still work as a checkout clerk at a grocery store, you will not receive a cent. Still confused? Get a further explanation of disability defenitions here.

One major drawback of group disability insurance is when the coverage ends. Your coverage will expire under the following conditions:

1. If your employment is terminated

2. If you retire

3. If your employer discontinues your employee benefit plan.

RBC Insurance has a hybrid group/indvidual disability plan referred to as Guaranteed Standard Issue. The plan has no medical underwriting, but applicants can keep their plan once they leave the group. You can get more details here.

Employees may be able to top up their group disability coverage with an individual plan. Individual disability plans also allow applicants to add riders like cost of living adjustment, or a future insurable rider, which allows the benefit to keep in line with inflation and increase the disability policy without a medical.

However, there is one caveat. Most insurance carriers will only cover up to 50-60% of the insured’s net income and the percentage lowers depending on how high their income actually is, e.g. If the insured makes $200,000/year, they may only be covered for 40% of their net income.

You can get a free online disability quote at our Disability Instant Quote Page.