Coverage Types, Price Factors and 2026 Rules
Life and disability insurance in Canada: how the layers of income protection fit together
How EI sickness, CPP/QPP disability, group LTD, term and permanent life, disability and critical illness insurance fit together in Canada, with 2026 figures.
In Canada, protecting your income against illness, injury or death means stacking several layers. Public programs pay first but modestly: EI sickness benefits replace 55% of insurable earnings, up to $729 a week in 2026, for at most 26 weeks, and CPP or QPP disability benefits pay a monthly pension (up to $1,741.20 a month under CPP in 2026) only if your disability is severe and prolonged. Employer group benefits, where you have them, add short-term disability (STD), long-term disability (LTD) and group life insurance. Whatever gap remains is filled by policies you buy yourself: term or permanent life insurance for your family if you die, individual disability insurance for lost income, and critical illness insurance for a lump sum after a serious diagnosis. The right amount of each depends on your debts, dependants and what the lower layers already pay.
This page is the overview for the coverage types and rules section. Each topic below has its own detailed guide.
The four risks and the coverage that answers each
| Risk | Public layer | Group layer | Individual layer |
|---|---|---|---|
| Short illness or injury (weeks to months) | EI sickness benefits, up to 26 weeks | Sick days, STD | Individual disability policy with a short waiting period |
| Long or permanent disability | CPP or QPP disability benefit | LTD | Individual disability insurance |
| Serious diagnosis (cancer, heart attack, stroke) | None specific | Sometimes group critical illness | Critical illness insurance |
| Death | CPP or QPP death benefit and survivor's pension | Group life (often 1 or 2 times salary) | Term or permanent life insurance |
Two observations come out of this table. First, the public layer is real but thin: a household that earns $100,000 a year would not keep its budget on EI or CPP disability alone. Second, the group layer is tied to a job. Group life and LTD usually end when employment ends, which is exactly when many people discover they have nothing of their own.
Life insurance: term or permanent
Term life insurance pays a tax-free lump sum if you die during a fixed period, typically 10, 20 or 30 years. It is the cheapest way to cover a need that ends, such as a mortgage or the years until your children are independent. Permanent life insurance (whole life or universal life) covers you for life and can build a cash value, but costs several times more for the same face amount. The trade-offs are explained in term vs permanent life insurance, and what moves the price, from age and tobacco use to underwriting class, is in life insurance premium factors.
Disability insurance: the coverage most people lack
For a working adult, the chance of a disability lasting several months before retirement is meaningfully higher than the chance of dying, and a disability usually costs the household more because the person still has living costs. Yet many people who carefully buy life insurance never check their disability coverage.
Whether a disability policy pays depends on a handful of terms: the definition of disability (own occupation or any occupation), the elimination period, the benefit period, and whether the contract is non-cancellable or only guaranteed renewable. These are explained in disability insurance policy terms.
Critical illness insurance
Critical illness insurance pays a lump sum if you are diagnosed with a covered condition and survive a waiting period, usually 30 days. It does not depend on whether you can work. It is useful for costs disability insurance does not touch, such as a spouse taking unpaid leave, but its definitions are narrow. See critical illness insurance in Canada.
The public layer in 2026
| Program | Who runs it | 2026 key figure | Main condition |
|---|---|---|---|
| EI sickness benefits | Service Canada | 55%, up to $729 a week, up to 26 weeks | 600 insurable hours; medical certificate |
| CPP disability benefit | Service Canada | Up to $1,741.20 a month; fixed portion $610.46 | Severe and prolonged; contributions in 4 of the last 6 years (or 3 of 6 with 25 years) |
| QPP disability pension | Retraite Québec | See Retraite Québec for 2026 amounts | Severe and prolonged; different test from age 60 |
Details, including how EI and employer plans interact and how Quebec differs, are in EI sickness benefits and CPP and QPP disability benefits.
A worked example: one household, four scenarios
The figures are illustrative. Maya, 38, in Ontario, earns $90,000 a year ($7,500 a month gross). Her employer provides group life of 2 times salary ($180,000), and LTD at 66.7% of salary after a 119-day elimination period, with employer-paid premiums. She has a $420,000 mortgage and two children.
- Off work for 8 weeks after surgery. No STD plan. After the one-week waiting period, EI pays 55% of her insurable earnings, capped at $729 a week, for 7 weeks: about $5,100 in total, taxable. Her lost gross pay is about $13,850.
- Off work for 18 months with a back injury. EI covers the first months; LTD starts after 119 days at $7,500 x 0.667 = $5,003 a month, taxable because the employer paid. The gap is about $2,500 a month gross, which over 14 months of LTD alone is roughly $35,000.
- Breast cancer diagnosis, back at work in 10 months. Without critical illness insurance, the family absorbs the treatment-year extras out of savings.
- Death. Group life pays $180,000 tax-free, less than half the mortgage. The family would need much more, as the life insurance needs calculation shows.
The pattern is typical: the group plan helps, but a mortgage-holding family with children usually needs personal term life insurance and should at least check whether individual disability coverage would close the LTD gap. Use the income gap calculator with your own numbers.
Quebec differences in brief
- The QPP disability pension, run by Retraite Québec, replaces CPP disability for people who worked mainly in Quebec.
- Quebec residents claim EI sickness benefits from Service Canada like everyone else; the Quebec Parental Insurance Plan covers parental benefits, not sickness.
- Life insurance contracts are governed by the Civil Code of Québec rather than a provincial Insurance Act, and a married or civil union spouse named as beneficiary is irrevocable unless stated otherwise.
- Advisors are registered with the Autorité des marchés financiers (AMF).
Frequently asked questions
Do I need life insurance if I have no dependants?
Often not much. If nobody relies on your income and your debts would be paid from your estate, the main needs are final expenses and any co-signed debt. Disability insurance usually matters more for a single person, because nobody else's income would cover your rent.
Is group coverage enough?
Rarely on its own. Group life of 1 or 2 times salary is usually below what a family with a mortgage needs, and both group life and LTD normally stop when you leave the employer.
What should I buy first?
For most working households: check what you already have, then buy term life if anyone depends on you, then look at the disability gap. Critical illness insurance comes after those two.
When should I talk to a professional?
For a policy above a few hundred thousand dollars, a complex health history, business owner needs or estate planning, speak with a licensed advisor and, for tax or estate questions, an accountant or lawyer (a notary in Quebec).
Sources
- Government of Canada — EI sickness benefits and CPP disability benefit pages
- Retraite Québec — QPP disability pension
- Canadian Life and Health Insurance Association (CLHIA) — consumer guides to life and disability insurance
- OmbudService for Life and Health Insurance (OLHI) — free complaint help
- Financial Consumer Agency of Canada (FCAC) — consumer information on insurance
