Short-term disability (STD) insurance replaces part of your income for a limited time if illness, injury, accident or hospitalization prevents you from working. Employers often include STD as part of workplace benefits. It is not the same as employment insurance (EI), which serves a different purpose and has different eligibility rules.
Many Canadians do not have disability coverage. A 2018 RBC Insurance survey found that fewer than half of Canadians had disability insurance through their employer, and among those without workplace coverage, 84% had not purchased private disability insurance either. If you lack coverage, it’s worth exploring options: a serious illness or injury without income protection can create major financial strain for you and your family.
Short-term disability insurance from an employer
If your employer provides STD coverage and you become unable to work because of illness or injury, you can file a short-term disability claim. Once approved, STD typically replaces a portion of your regular income for up to 26 weeks, although the exact duration depends on the policy. If you remain unable to work after STD benefits end, you may qualify for long-term disability or other benefits. The primary difference between short- and long-term disability is the time frame: short-term plans cover weeks or months; long-term plans cover years.
Even if you have employer-provided STD, you may choose to buy an individual policy through a licensed insurance broker. When evaluating your coverage, calculate how much of your usual income you need to maintain basic expenses like housing, utilities, groceries and medications. Review your group benefits summary—most employers make this available on an intranet or through human resources. Ask HR for a copy of your policy documents and a clear walkthrough if anything is unclear.
Many group plans replace 50% to 70% of your salary, but most also include a monthly cap—commonly $2,000 to $3,000 a month. That cap can leave gaps between benefits and your actual needs, so consider a private top-up if group coverage isn’t sufficient.
If you don’t have disability coverage from an employer
Self-employed people and those without workplace benefits can purchase STD insurance through an insurance broker or a professional association. Group policies negotiated by employers tend to be less expensive per person because of volume discounts; buying privately may cost more, but disability coverage can still be affordable. Request multiple quotes to compare coverage and pricing before deciding.
What short-term disability insurance covers
STD benefits are paid only after you file a claim and your insurer or plan administrator approves it. The core requirement is that a medical condition prevents you from performing your job duties. Coverage varies by policy and insurer.
Not all conditions qualify. For example, employers and insurers may not approve claims solely for general stress, though anxiety or depression that meets medical criteria can be covered depending on the plan. Pregnancy itself is generally managed under maternity or parental leave rules, but if medical complications require you to stop working before parental leave begins, you might qualify for STD benefits.
How to file a claim for short-term disability
Filing a claim usually involves paperwork from you, your doctor and your employer. Typical documentation includes:
- Notice of claim form
- Doctor’s report or medical documentation
- Employer’s report describing work duties and the impact of the condition
These reports should explain the diagnosis, recommended treatment, how the condition affects your ability to work and confirmation that you are applying for STD. Submit the completed claim to the insurer or plan administrator and wait for a decision.
Some plans require you to exhaust sick days and vacation before STD payments begin. Insurers may also request an independent medical examination or periodic medical updates. When you’re ready to return to work, coordinate with your doctor and employer to ensure a safe transition—this could mean returning full-time, or starting with reduced or modified duties.
EI vs. short-term disability
Employment insurance and short-term disability serve different situations and generally cannot be received at the same time. If you lose your job while on STD, you may be able to transition to EI. If termination occurs during a disability leave and you believe the dismissal was related to your illness or disability rather than legitimate business reasons, consider consulting an employment lawyer to understand your rights.
Do you owe taxes on short-term disability benefits?
Tax treatment depends on who pays the premiums. If your employer pays the premiums for a group plan, benefits are typically taxable as income. If you purchase and pay the premiums for a private policy yourself, benefits are usually received tax-free. Always confirm the tax implications with your insurer or a tax professional.
What happens when short-term disability insurance runs out?
If you are not medically able to return to work when STD benefits end, you should review your options for long-term disability coverage and other forms of income support. Read your policy carefully so you understand waiting periods, elimination periods and the criteria for converting to long-term benefits.
More about insurance:
- What you need to know about disability insurance
- What to expect when illness or injury prevents you from going back to work
- You need long-term disability insurance. Now what?
- The best life insurance in Canada