Disability insurance replaces a portion of income if illness or injury keeps you from working.
Group coverage through an employer often stops at a modest monthly cap or ends with the job; individual disability insurance fills that gap and stays with you regardless of employer.
Look at elimination periods (how long before benefits start) and benefit periods (how long they last) when comparing policies.
- Elimination period
- Before benefits start
- Benefit period
- How long they last
- Personally paid premiums
- Benefits tax-free
- Individual policy
- Portable
Commonly 30 to 120 days
From 2 years up to age 65
Employer-paid premiums generally make benefits taxable
Stays with you between jobs
The definition of disability is the most important clause
"Own occupation" means you are considered disabled if you cannot perform the specific job you were trained for. "Any occupation" is far stricter — it means you are only covered if you cannot do any reasonably suitable work at all.
This distinction decides claims. Group plans frequently start with own-occupation coverage and then shift to a stricter standard after roughly 24 months, which is precisely when a long-term claim becomes most financially serious. Knowing which definition applies, and when it changes, matters more than the headline percentage.
Why the tax treatment changes the maths
When you pay premiums personally with after-tax dollars, benefits are generally received tax-free. When your employer pays the premiums, benefits are typically taxable as income.
That means a group plan advertising 66% income replacement may deliver closer to half your take-home pay after tax, while a personally owned policy paying a lower stated percentage can actually put more in your hands. Comparing stated percentages alone is misleading.
Group and individual coverage together
- Group plans usually cap benefits at a fixed monthly maximum, which affects higher earners disproportionately
- Group coverage generally ends when your employment does, with no guarantee you will qualify for new coverage
- Individual policies are underwritten once and stay in force as long as premiums are paid
- Look for non-cancellable and guaranteed renewable wording, which locks in premiums and terms
Worth checking before you decide
- A longer elimination period lowers premiums, but only works if your emergency savings can bridge the gap
- Benefit periods to age 65 cost more but cover the risk that actually causes financial ruin
- Check whether the policy includes partial or residual benefits for returning to work gradually
- Ask about a cost-of-living adjustment rider on long benefit periods, since inflation erodes a fixed benefit
- Self-employed applicants should expect income verification, so keep clean financial records
Common questions
How much of my income can I insure?
Insurers generally limit coverage to a percentage of income rather than all of it, so there remains a financial incentive to return to work. The exact proportion varies by insurer and occupation.
Does my occupation affect the price?
Considerably. Insurers classify occupations by risk, so physically demanding trades typically pay more than desk-based professional roles for identical coverage.
Are mental health and back conditions covered?
Often yes, but these are among the most commonly limited categories, sometimes capped at two years. Because they are also among the most frequent causes of long-term claims, it is worth reading the specific wording.
Important
This page provides general information only and is not personalized financial, tax, or legal advice. Product features, availability, and eligibility vary by provider. Figures shown are for the 2026 tax/benefit year and are subject to change — book a conversation with Supriya to confirm what applies to your situation.
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