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Posted: Oct 1 '21
Self-employment is an opportunity to be an owner and employer at your workplace. You get to build your business from the ground up and leave something behind for your loved ones. Unfortunately, this also means that you need to always be available for your business. So what happens when you contract a severe disease or sustain devastating injuries? Having a safety net is crucial to protect you and your business when disaster strikes. A disability insurance policy offers a reliable safety net against life-changing illnesses and injuries. Talk to a Vistaplan advisor today!
Your business thrives best when you're around to oversee operations. You're the manager, visionary, and essential employee. When you're not around, your work suffers, and your personal income takes a hit. As such, caring for yourself and your family proves difficult.
Disability insurance protects you and your loved ones in case of a life-changing illness or injury. The truth is that you can't foresee such incidents, which is why you need an active disability policy ahead of time.
When a critical illness or extensive injuries stall your ability to work, disability insurance steps in and covers your monthly income, so that you can recuperate and undergo therapy peacefully.
A disability policy that covers your own business offers a specific percentage of your earnings, usually around 70% of your income, as compensation when you cannot work due to illness or injury. When choosing an individual disability insurance package, it's important to look at the premiums and cap on benefits. Some insurance providers may charge high premiums but offer compensation up to a specific amount. It's best to choose a package that has enough payout to cover your basic living expenses.
A great package provides benefits that cover your:
As such, it's important to have a good idea of your living expenses, and probably, documents to prove it.
You should also check the benefits period (the period in which you receive benefits) and the waiting period (the period before you start receiving benefits). Benefit periods are commonly 2 years, 5 years or up to age 65, and waiting periods are often 30, 60, 90 or 120 days. Generally, if a policy has a short benefits period and a long waiting period, it costs less.
In addition, disability insurance for self-employed individuals works slightly differently. First, the insurance company needs proof that you’ve been self-employed for a specific period. Second, the coverage you can get is tied to the income you can prove, so it may be lower than you expect, which is why you should also consider business overhead expense coverage. It helps pay your business's fixed costs, such as rent, staff wages and utilities, while you recover.
Self-employed Canadians are not automatically covered by Employment Insurance. You can opt in to EI special benefits by registering with Service Canada and paying premiums on your self-employment income, and you must wait 12 months from your confirmed registration before you can apply. Once eligible, EI sickness benefits pay 55% of your average insurable weekly earnings, to a maximum of $729 a week in 2026, for up to 26 weeks.
The Canada Pension Plan disability benefit is paid only when a disability is both severe and prolonged, meaning you are regularly unable to do any substantially gainful work and the condition is long-term or of indefinite duration. You also need CPP contributions in 4 of the last 6 years, or in 3 of the last 6 years if you have contributed for at least 25 years.
Neither program is designed to replace a business owner's full income or to cover the costs of keeping a business running, which is why many self-employed people add a private disability policy.
Individual disability policies pay a monthly benefit based on your current income, usually around 70% of it. The exact maximum depends on the insurer, your occupation and the income you can document.
The waiting period, also called the elimination period, is chosen when you buy the policy. Common options are 30, 60, 90 or 120 days. A longer waiting period generally lowers the premium, but you need savings to cover the gap.
The benefit period is also chosen when you buy the policy. It can be 2 years, 5 years or up to age 65. Shorter benefit periods generally cost less.
Only if they opt in. Self-employed people can register with Service Canada for EI special benefits and pay premiums on their self-employment income, then wait 12 months from confirmed registration before applying. EI sickness benefits pay 55% of average insurable weekly earnings, to a maximum of $729 a week in 2026, for up to 26 weeks.
When you pay the premiums for an individual disability policy personally, the premiums are not tax-deductible and the benefits are generally received tax-free. The brokers at Vistaplan Financial will help you confirm how this applies to your business.
Proof of how long you have been self-employed and of the income you earn, along with details such as your occupation, date of birth, smoking status and health. Your broker helps you prepare this before the application is submitted.
Disability insurance is often overlooked by the self-employed. Protect yourself and your loved ones with a disability policy as part of your full insurance strategy. A disability insurance broker compares policies from several insurers for you and can support you through a claim later on. Talk to a Vistaplan disability insurance advisor to find the right policy for your business.
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David is a well-respected insurance advisor with over 30 years of experience helping healthcare professionals, business owners, and their
families secure their financial futures. He takes the time to make certain his clients understand the life, disability, and health insurance
products they are purchasing, so they can make the right choices for their budgets, plans, and futures.
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