In 2025, Canada’s self-employed workforce continues to grow rapidly. According to Statistics Canada, over 2.7 million Canadians are now self-employed, a number that has steadily risen over the past decade. These entrepreneurs, freelancers, gig workers, and independent professionals are often celebrated for their independence, flexibility, and innovation. Yet, despite their forward-thinking nature, many still overlook a crucial component of their financial security: disability insurance.
What Is Disability Insurance?
Disability insurance provides a source of income if you’re unable to work due to illness or injury. Employers often offer group plans for salaried employees that include short-term and long-term disability coverage. However, for the self-employed, the responsibility to obtain this protection lies solely on their shoulders.
If you are self-employed and become ill or injured, disability insurance is often the only way to ensure you can still pay your mortgage, bills, and business expenses.
The Alarming Oversight Among Self-Employed Canadians
1. The Myth of Invincibility
One of the main reasons self-employed Canadians overlook disability insurance is the It won’t happen to me mindset. Many young or healthy professionals assume they are immune to long-term illness or injury. Unfortunately, the numbers tell a different story.
According to the Canadian Life and Health Insurance Association (CLHIA), 1 in 3 working Canadians will experience a period of disability lasting longer than 90 days during their working life. The risk is real, and major accidents do not just cause it. Chronic illnesses like back pain, mental health conditions, or autoimmune diseases often lead to long-term disability.
2. Lack of Awareness
Many self-employed Canadians are unaware that disability insurance exists outside employer benefit plans. They may believe it’s only for salaried employees or that it’s out of their financial reach.
In 2025, with more online platforms and fintech advisors than ever before, information will be available, but awareness will still be lacking. Financial literacy campaigns have yet to bridge the gap for Canada’s growing freelance and gig economy.
3. Cost Misconceptions
Another significant barrier is the misconception that disability insurance is too expensive for self-employed individuals. While policies do come at a cost, they are highly customizable. Factors like benefit period, waiting period, and coverage amount affect premiums.
A monthly premium for a healthy 35-year-old could be less than the cost of a daily coffee, especially when compared to the financial devastation a disability could bring.
4. No Employer Means No Nudges
Employees are often auto-enrolled in group plans or at least offered coverage by HR departments. Self-employed workers, however, must take the initiative. Without an employer prompting them, insurance becomes an afterthought—until it’s too late.
This lack of structured support makes many entrepreneurs prioritize business expenses over personal protection.
5. Overreliance on Government Benefits
Some self-employed Canadians mistakenly believe that government programs like Employment Insurance (EI) or the Canada Pension Plan (CPP) will cover them in case of disability. While EI sickness benefits or CPP Disability can help, they come with strict eligibility criteria and low benefit amounts.
For instance, as of 2025, the maximum monthly CPP disability benefit is around $1,600, far below the average cost of living in most Canadian cities.
The Financial Risks of Skipping Disability Insurance
1. Loss of Income
Self-employed individuals are often their primary (or sole) income source. If they can’t work, they stop earning. Without a safety net, a few months of missed work can wipe out savings or force them into debt.
2. Business Disruption
A serious illness or injury can halt not just income, but also the operation of the business itself. Without income protection, business continuity becomes nearly impossible.
3. Increased Debt and Bankruptcy Risk
According to a 2024 report by the Canadian Bankruptcy Association, medical-related income loss is one of the leading causes of personal bankruptcies among self-employed Canadians. Many are forced to borrow against their home or retirement savings without insurance, jeopardizing long-term financial goals.
4. Family Strain
In families where the self-employed individual is the primary breadwinner, a disability can place a massive financial and emotional strain on spouses and children. Relying solely on a partner’s income or liquidating assets can create tension and reduce the quality of life.
Types of Disability Insurance for Self-Employed Canadians
In 2025, the insurance industry offers tailored products for entrepreneurs and freelancers. The most common types include:
1. Individual Disability Insurance
This is the most flexible and common form of protection. You choose the coverage amount, benefit period (e.g., 2 years, 5 years, until age 65), and waiting period (e.g., 30, 60, 90 days). It replaces a percentage of your income if you’re unable to work.
2. Overhead Expense Insurance
Designed for business owners, this policy covers monthly expenses such as rent, salaries, utilities, and more if you cannot work due to disability. This ensures your business can keep running even while you recover.
3. Critical Illness Insurance
Though not the same as disability insurance, critical illness insurance offers a lump sum payment upon diagnosis of a serious illness like cancer, heart attack, or stroke. It can complement disability coverage or provide interim relief.
Why 2025 Is the Year to Act
1. The Economy Is Volatile
With economic uncertainty, inflation, and rising living costs, securing a stable income source is more critical than ever. Disability insurance provides peace of mind during unpredictable times.
2. Flexible Plans Are Widely Available
In 2025, digital platforms and independent insurance brokers will offer flexible, easy-to-understand policies tailored to gig workers and freelancers. The process will be faster and more transparent than in previous years.
3. Tax Advantages
Premiums for certain types of disability insurance (like business overhead expense insurance) may be tax-deductible. Additionally, disability benefits received from personal policies are typically non-taxable if paid with after-tax dollars.
How to Choose the Right Disability Insurance as a Self-Employed Canadian
1. Assess Your Income and Expenses
Start by determining how much income you would need to cover essential living and business expenses if you couldn’t work. Don’t forget to include debt payments and savings goals.
2. Compare Policy Options
Not all disability insurance policies are created equal. Work with a licensed insurance advisor or broker who understands the needs of self-employed individuals. Ask about:
- Elimination (waiting) period
- Benefit duration
- Definition of disability (own occupation vs. any occupation)
- Optional riders like inflation protection
3. Get Quotes from Multiple Providers
Use online quote engines or consult independent brokers to compare prices. Look for a balance between premium affordability and sufficient coverage.
4. Review Annually
Your income, expenses, and lifestyle will evolve. Make it a habit to review your policy every year or whenever there’s a major life change, such as a marriage, home purchase, or new business venture.
Real-World Example: Lisa’s Story
Lisa, a 42-year-old freelance graphic designer in Toronto, had never considered disability insurance. In early 2024, she developed a serious repetitive strain injury that left her unable to work for over eight months.
Without income, Lisa drained her savings, maxed out her credit cards, and fell behind on mortgage payments. Today, she advocates for disability insurance, often saying:
What Needs to Change?
1. Education and Outreach
Governments and financial institutions must ramp up education efforts. Including disability insurance in small business support programs and financial literacy initiatives can close the knowledge gap.
2. Bundled Solutions
Insurance companies should offer bundled packages that include disability, life, and overhead coverage tailored for freelancers and gig workers.
3. Technology Integration
Apps and digital tools that help self-employed Canadians manage invoices, taxes, and budgeting should also integrate insurance education and access, making coverage a natural part of financial planning.
Secure Your Income with Confidence — Talk to Top Choice Insurance Today
At Top Choice Insurance, we specialize in protecting self-employed Canadians just like you. Whether you are a freelancer, contractor, or small business owner, our advisors can help you find the right disability insurance plan that fits your budget and lifestyle.
