Who Pays for Long-Term Disability in Canada?

If you’re receiving long-term disability (LTD) benefits — or thinking about applying — one of the most common questions is simple:

Who actually pays for long-term disability?

The answer depends on where your coverage comes from and how your LTD plan is set up. Below is a clear, plain-language breakdown.

Short Answer

In most cases, long-term disability benefits are paid by an insurance company, not directly by your employer or the government.

But there are important exceptions.

Most Long-Term Disability Benefits Are Paid by an Insurance Company

Long-term disability benefits in Canada are typically part of a group insurance plan, and understanding how long-term disability in Canada works is the first step in knowing who pays and why.

Here’s how it typically works:

• Your employer offers a group benefits plan
• LTD coverage is included in that plan
• A private insurance company administers and pays the benefits
• Monthly payments are made directly to you while you’re unable to work

Who Pays for the LTD Premiums?

This is where things can vary — and it matters.

1. Employer-Paid LTD Premiums

If your employer pays the full cost of the LTD premiums:

• The insurance company still pays your benefits
• But your LTD payments are usually taxable income

2. Employee-Paid LTD Premiums

If you pay the premiums yourself (often through payroll deductions):

• The insurance company pays your benefits
• Your LTD payments are usually tax-free

3. Shared Premiums

Some plans split the cost between employer and employee.

• Tax treatment may be partially taxable
• It depends on how the plan is structured

Does the Government Pay Long-Term Disability?

No — not private LTD.

Government programs do not pay benefits under private long-term disability policies.

However, you may also qualify for:

• CPP Disability benefits, which are paid by the federal government
• These are separate from private LTD
• Many LTD policies require you to apply for CPP Disability
• CPP payments are often deducted from your LTD benefits

What About Self-Employed or Individually Purchased LTD?

If you’re self-employed or bought your own LTD policy:

• You pay the premiums directly to the insurer
• The insurance company still pays the benefits
• Payments are often tax-free if premiums were paid personally

Why the Payer Matters So Much

Understanding who pays for LTD helps explain why claims are often disputed.

Insurance companies:

• control eligibility decisions
• review medical evidence
• conduct file reviews and medical assessments
• decide when benefits continue or stop

Disputes often arise over how long long-term disability benefits last and when insurers believe payments should end.

What If the Insurance Company Stops Paying?

If your LTD benefits are denied or terminated:

• Your employer usually cannot override the decision
• The dispute is typically between you and the insurer
• Deadlines apply, and delays can hurt your claim

This is where understanding your rights becomes critical.

Key Takeaways

• Most LTD benefits in Canada are paid by insurance companies
• Employers usually provide the coverage, but don’t pay the benefits themselves
• Who pays the premiums affects whether benefits are taxable
• Government programs like CPP Disability are separate
• Disputes almost always involve the insurer — not your employer

Need Help With a Long-Term Disability Issue?

If you’re unsure who should be paying your benefits — or your LTD payments have been denied, delayed, or cut off — getting clarity early can make a big difference.

At Samfiru Tumarkin LLP, our disability lawyers regularly help people across Canada understand how long-term disability claims work and what options may be available when insurers push back.