What is long-term disability and who can use it?

Updated: December 11, 2025

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Employees are important assets for employers and their businesses. But when an employee is unable to work for a period of time due to a disability or sickness, long-term disability benefits can provide relief.

In this article, we’ll talk about everything that workers and employers need to know about these benefits. For topics not covered here, you can consult any of our Lexpert-ranked long-term disability lawyers.

What are long-term disability benefits in Canada?

The law provides many benefits when an employee suffers from an accident or illness, depending on whether it is occupational or not work related. One of these benefits is long-term disability benefits, also called LTD benefits.

LTD benefits in Canada are insurance policies for employees who suffer from an accident-causing injury for a longer period. These LTD benefits are offered by private employers and certain government programs, which differ from each other in terms of:

eligibility requirements
payment of premiums
application process
specific benefits to be received

They’re considered as insurance plans that substitute a part of the salary or wage of an employee, when they are unable to work after becoming disabled. This disability may be a result of:

an injury
an accident
an illness

While the disability can happen whether the employee was in the workplace or not, the policy or contract may only cover those that are work-related.

Watch this video to learn about LTD benefits and how lawyers can help clients regarding these matters:

Looking for lawyers to help you with your LTD benefits? Check out our directory of the best long-term disability lawyers in Canada as ranked by Lexpert.

How long-term disability benefits work

LTD benefits depend on the insurance policy or government program that the employee is a part of. As such, it’s important to know the rules before getting a policy or enrolling in a program.

Here’s the usual process of how LTD benefits work:

different policies, different benefits: each policy and program, whether by the government or private entities, has its own standards and procedures in assessing who qualifies for the LTD benefits
eligibility requirements: to be eligible for LTD benefits, applicants must have contributed enough premium payments to the policy or program; also, the disability must fall under its definition of “long-term disability”
after short-term disability: LTD benefits are not automatic, since there is an application process to be followed; usually, LTD benefits only start after exhausting one's short-term disability benefits
grounded in medical records: an application for LTD benefits is approved only after a medical determination that says that the illness or injury is of long-term or of indefinite duration
policy- or contract-based: the LTD policy also dictates what injuries, illnesses, or diseases are covered; it will also require the payment of premiums, which may be paid by the employees and/or the employers
period of LTD benefits: in most insurance policies or government programs, LTD benefits are given for two years, or until the recipient reaches a certain age (e.g., 65 years old) where they are converted to another type of benefits
appeals in case of denial: aside from the application process, there’s a separate procedure for appeals and contests about the insurer’s decision, especially about the benefits or its calculations

Canadian laws on long-term disability benefits

LTD benefits in Canada are governed by a combination of federal and provincial/territorial laws and programs. When disputes arise out of these insurance plans, Canada’s common law on contracts and insurance policies will then apply.

Some federal laws regarding long-term disability benefits include the:

Canada Pension Plan (CPP)
Disability Tax Credit program
Government Employees Compensation Act (GECA)

Certain Canadian provinces have also enacted their own laws covering disability benefits for employees:

Ontario has enacted the Ontario Disability Support Program Act (ODSP)
British Columbia has the Long-Term Disability Plan Regulation
Québec has its own Pension Plan (QPP), in lieu of the CPP

Who offers long-term disability benefits in Canada?

Below are some of the insurance policies and government programs that offer LTD benefits in Canada. Note that these policies and programs will vary; for example, their definition of “long-term disability” to become eligible for benefits may be different from each other. Because of this, it’s important to know each of these benefits, and pursue the most appropriate ones for an employee’s circumstances.

Canada Pension Plan (CPP)

While the CPP mainly provides retirement pension, it also offers the federal LTD benefits for qualified workers. Under the CPP disability benefits (CCPD benefits), a long-term disability must be “severe and prolonged,” which means that:

the employee’s mental or physical disability must prevent them from doing any substantially gainful work
the disability must not only be “long-term” in nature, but also indefinite or one that will likely result in death

Workers’ Compensation Board (WCB)

Each provincial and territorial WCB has LTD benefits for eligible employees in that province or territory. These WCBs are governed by their respective Workers’ Compensation Act.

Every WCB has its own standard of long-term disability. For instance, LTD benefits in Ontario under its Workplace Safety and Insurance Board (WSIB) requires that:

the employer is covered by the WSIB
the employee’s injury or illness is work-related

Private insurance policies

Workers can also avail of long-term disability benefits from private, group, or employer-provided insurance policies. Since these are essentially contracts, the insurance policy defines the covered illnesses, injuries, and diseases. It will also specify the period that it considers “long-term” (e.g. 3 months, 6 months, or 1 year).

Long-term vs. short term

Here’s a short video explaining private LTD benefits and how they compare to short-term disability benefits:

If you’re from Ontario, contact one of the Lexpert-ranked best long-term disability lawyers in Ontario if you need help with your LTD benefits.

Who qualifies for long-term disability benefits in Canada?

Employees, or insurance policyholders, must check with their employers and their insurance provider on how they can qualify for LTD benefits. It may depend on certain factors, such as the following:

the sickness or disability covered by the insurance policy or contract
the amount of insurance premiums that the employee and/or employer paid
any other terms and conditions set in the policy or contract

Government employees

Federal government employees in Canada may be eligible for the Federal Workers’ Compensation Service under the GECA. This applies if they work in:

federal departments or agencies
in any Crown corporation
any other designated government offices

Private employees

Private sector employees or self-employed people may be eligible under CPPD benefits. They should be under 65 years old and should have made contributions to the CPP either:

in four of the last six years
for at least 25 years, including three of the last six years
is eligible under CPP’s “late applicant provision”

Those who care for recipients of CPPD can also receive some benefits from the CPP’s Employment Insurance (EI) caregiver benefit:

If you're away from work caring for someone, let us support you while you support them ❤️

Get clarity on the different types of Employment Insurance caregiving benefits that might be available to you.

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— Service Canada (@ServiceCanada_E) September 18, 2025

Learn more about the different LTD benefits by contacting the best long-term disability law firms in Canada as ranked by Lexpert. Know how much does a long-term disability lawyer cost in Canada here.

How much does long-term disability benefits pay in Canada?

Income replacements under long-term disability benefits in Canada may range from 60 percent to 70 percent of a disabled employee’s average salary. However, this will depend on the insurance policy or the disability plan the policyholder is eligible for.

Still, employees must consult with their employers and insurance provider on the specific computation of their long-term disability benefits.

Calculating long-term disability benefits

For private insurance holders:

the monthly payments of the LTD benefits are calculated based on the terms and conditions of the insurance policy
an agreed percentage of the gross income will be the base pay, subject to certain deductions, such as taxes
other compensation from the employer will not be included in the LTD payment calculations (e.g., overtime pay, bonuses, or commissions)

For government benefits:

CPP: the current maximum monthly payment for disability benefits under the CPP is $1,673.24 as of 2025, with the following factors:
- basic monthly amount of $598.49
- additional amount based on the worker’s CPP contributions
WCB: injury payouts from WCBs will replace 90 percent of the disabled employee’s salary or net earnings while they recover from the work-related injury or illness

These amounts increase every year to adjust for the increase in the cost of living in Canada.

Are long-term disability benefits taxable?

Whether the LTD benefits are taxable or not depends on the insurance policy. It will also depend on whether the insurance premiums are solely paid by a self-employed individual or by the employer:

private LTD benefits: when an employee does not have to pay taxes for the insurance premiums that their employer has paid, the LTD benefits will become taxable when received by the employee
government LTD benefits: government insurance plans vary when it comes to taxes; for example, while CPP disability benefits are taxable, Ontario’s Disability Support Program (ODSP) is non-taxable

To reduce their income taxes, disabled employees may apply for a Disability Tax Credit (DTC) when certified by a medical practitioner. This is a non-refundable tax credit offered by the Canada Revenue Agency.

In addition, CPP pensioners may:

send a Request for Voluntary Federal Income Tax Deductions with the Service Canada
apply for a Working Income Tax Benefit (WITB) when the employee files their annual tax return

Can you collect long-term disability benefits and other benefits at the same time?

Collecting LTD benefits together with other disability benefits is usually not allowed. In most cases, one of the benefits will be reduced to the amount received from the other benefit.

Below are some of the implications of one’s LTD benefits against another:

Private LTD and other disability benefits

The majority of private long-term disability benefits in Canada will offset the other benefits received from other sources, especially those that are received from the government. This happens either for benefits sponsored by the employer or bought individually, such as insurance policies that have “offset clauses.”

CPPD and WCB disability benefits

Like the private policies’ offsetting clauses, the permanent disability benefits that employees receive from their WCBs will be reduced if they’re also receiving CPPD benefits for the same disability.

This is to prevent double compensation, given that it is the same disability they’re being paid for. However, this set-up will not prevent an employee from receiving their disability benefits from the CPP.

For instance, British Columbia’s WorkSafeBC will deduct 50 percent of the CPPD from the WorkSafeBC permanent disability benefits if it’s for the same injury or disability. While this is the policy in most WCBs, it is still best to check first-hand with one’s own WCB regarding this policy.

Exception: Other benefits

However, offsetting does not apply to the other benefits that the other entity or program is giving. On the part of the CPP, its CPPD benefits are not deducted from other benefits that an employee receives from their WCB (e.g., WCB wage or income replacement).

Employment Insurance (EI) and other benefits

EI benefits are sickness benefits that employees may receive up to 26 weeks (about six months). They can receive 55 percent of their average weekly insurable earnings up to the largest amount of $695 per week (for the year 2025).

However, if an employee is already receiving CPPD benefits, the EI earnings may be reduced by how much CPPD benefits they’re also receiving. This also applies to benefits from the WCB, but only to the value of temporary wage or income replacement benefits.

As a result, the following WCB benefits are not considered as earnings and have no impact on one’s EI benefits:

lump-sum benefits or pensions
payments for injury or illness-related expenses
payments for permanent impairment

Can I earn money while on long-term disability benefits in Canada?

Employees may still work other jobs if they are on an “own occupation” or “any occupation” insurance policy. Still, they will have to check with their employer and insurance company if such an arrangement is allowed.

As to the CPPD benefits, working or becoming self-employed while receiving these benefits come with certain conditions. First, employees must inform Service Canada that they will be working while receiving disability benefits. Next, the CPPD benefits will be affected by the amount of income that the disabled employee will be receiving:

below $6,600 (before tax): will not affect the CPPD benefits
between $6,600 and $18,508.36 (before tax): CPPD benefits may be reduced
above $18,508.36 (before tax): will be disqualified from receiving CPPD benefits

Long-term disability benefits: Stability when health issues arise

Long-term disability benefits act as a safety net when work is no longer possible for a time. They help replace income, so daily expenses remain manageable. This support can reduce stress and give employees space to focus on healing.

Whether you’re an employee or an employer, it’s important to know what LTD benefits are and their relationship with the other disability benefits. This is to prepare everyone in case an unfortunate event occurs, in or out of work.

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