A Self-Employed Contractor Insures His Income
Illustrative case study: a self-employed Ottawa electrician with no group benefits compares WSIB, EI and individual disability insurance, with indicative cost.
This is an illustrative scenario based on situations we commonly see. The names and details are fictional and are not based on any actual client. We’ve built it to show how a self-employed tradesperson with no group benefits works out what would happen to his income if he couldn’t work, what the options look like side by side, and roughly what a sensible plan costs.
The short version: a 38-year-old electrician running his own contracting business in Orléans assumed WSIB and his savings had him covered. A closer look showed WSIB only applied to work-related injuries, EI would pay a modest amount briefly, and his savings would last six months. An individual disability policy paying $4,500 a month to age 65, plus a small business overhead expense policy, came to an indicative $240–$340 a month.
If you’re self-employed and nobody pays you when you don’t show up, this is for you.
The situation
Meet Ryan (38). He’s a licensed electrician who left a large contractor six years ago to start his own incorporated business doing residential service work and renovations across east Ottawa. He has one apprentice on payroll and a leased van. In a typical year the business pays him about $95,000 in salary and dividends.
His spouse, Jenna (36), is a part-time dental hygienist earning around $40,000. They have two children, 7 and 4, a $380,000 mortgage on a house in Orléans, and about $50,000 in savings across a TFSA and a corporate account.
Ryan’s insurance picture when he called us:
- Term life insurance of $750,000, bought when the first child was born
- WSIB coverage, which Ontario requires for most people working in construction, including many independent operators and business owners
- No disability insurance, no critical illness insurance, no health and dental plan
His accountant had raised disability insurance; Ryan had looked at an online quote and shelved it. What prompted the call was a fellow contractor who’d been off work for eight months after shoulder surgery.
The risk
We asked the question we always ask: if you couldn’t work for a year, where would the money come from?
Ryan’s first answer was WSIB. But WSIB responds to injuries and illnesses caused by the work. Most long disabilities are illnesses (cancer, heart conditions, mental health, back conditions with no single cause) or injuries that happen off the job. WSIB has nothing to say about either.
His second answer was EI. Self-employed people can opt in to EI special benefits, including sickness benefits, but you must register and pay premiums for a year before claiming, and the benefit is 55% of average insurable earnings up to the annual cap, for a maximum of 26 weeks. Ryan hadn’t opted in. See whether EI covers you if you can’t work for the mechanics.
CPP Disability requires a severe and prolonged disability, and the benefit is modest and taxable. It’s a backstop, not a plan for a nine-month recovery. See CPP Disability vs. private disability insurance.
That left the $50,000 in savings. Between the mortgage, the van lease, the apprentice’s wages and a household that runs on Ryan’s income, we estimated it would last about six months. An electrician who can’t climb, kneel or lift isn’t partly disabled; he’s unemployed.
The options compared
We looked at every route to replacing Ryan’s income, including the free ones.
| Option | What it pays | Waiting period | How long | Main drawback |
|---|---|---|---|---|
| Self-insure with savings | Whatever’s in the account | None | ~6 months | Then nothing; wipes out the family’s cushion |
| WSIB | Portion of earnings for work-related injury or illness | Short | Varies | Doesn’t cover illness or off-the-job injury |
| EI special benefits (opt in) | 55% of insurable earnings up to the cap | 1 week, after 12 months of registration | Up to 26 weeks | Short, capped, needs a year of premiums first |
| CPP Disability | Modest monthly benefit, taxable | Months, strict threshold | Until 65 if approved | Only for severe and prolonged disability |
| Bank mortgage disability insurance | Mortgage payment only | Typically 30–60 days | Often capped at 1–2 years | Pays the lender; post-claim underwriting; ends with the mortgage |
| Individual disability insurance, 5-year benefit period | $4,500/month, tax-free | 90 days | Up to 5 years per disability | Long disabilities outlast it |
| Individual disability insurance, to age 65 | $4,500/month, tax-free | 90 days | To age 65 | Highest premium of the personal options |
| Business overhead expense (BOE) | Reimburses fixed business costs | 30 days | 12–24 months | Doesn’t replace personal income |
Two options got most of our attention: the individual disability insurance policy (and how to structure it) and business overhead expense coverage.
How much benefit, and how it’s calculated
Insurers set a self-employed person’s benefit on documented net earned income, supported by two years of tax returns or notices of assessment and, for a corporation, the financial statements. Ryan’s $95,000 supported a benefit in the range insurers typically allow, 60–70% of income. We settled on $4,500 a month, which, tax-free, comes close to what he nets now. Our guide to how much disability insurance you need walks through the calculation.
We flagged one thing: if Ryan wrote down income more aggressively in future, his insurable income would shrink with it. Contractors who report very low income often can’t buy the coverage they need.
Occupation class and the definition of disability
Electricians sit in a higher-risk occupation class than office workers, which raises premiums and, with some insurers, limits the options. A true own-occupation definition to age 65 is often unavailable for trades; the common structure is a “regular occupation” definition for two years, after which the insurer assesses whether you can do any occupation you’re reasonably suited to. See own-occupation vs. any-occupation disability insurance for why this matters.
A few insurers actively welcome tradespeople; others don’t want the class at all. Comparing insurers changes the answer, not just the price. See disability insurance for tradespeople for the profession-specific detail.
Elimination and benefit periods
Ryan’s savings could cover roughly 90 days, and a 90-day elimination period is materially cheaper than 30 or 60. We looked at 120 days too, but the extra saving wasn’t worth the squeeze. Our explainer on the disability insurance elimination period has the trade-offs.
The 5-year benefit period was tempting on cost. But the scenario that ruins a family isn’t the five-month recovery; it’s the disability that lasts fifteen years. We recommended to age 65.
Riders
We added a partial (residual) benefit, which pays a proportion of the monthly amount if Ryan returns at reduced hours or income, and a future insurability option so he can increase coverage as the business grows without new medical evidence. The policy is non-cancellable and guaranteed renewable, so the insurer can’t raise the premium or change the terms.
The recommendation and indicative cost
Here’s the package. All figures are illustrative monthly premiums for a healthy 38-year-old non-smoker in a trade occupation class; actual rates depend on occupation, insurer, health, income documentation and options chosen. These are not quotes.
| Coverage | Structure | Indicative monthly premium |
|---|---|---|
| Individual disability insurance | $4,500/month, 90-day elimination, benefit to age 65, regular-occupation definition, residual benefit, future insurability, non-cancellable | ~$190–$270 |
| Business overhead expense | $3,500/month of fixed business expenses reimbursed, 30-day elimination, 18-month benefit period | ~$50–$70 |
| Indicative total | ~$240–$340 |
For comparison, the same policy with a 5-year benefit period would have been roughly $120–$170 a month. That’s the option Ryan would have chosen on his own, and the one that would have failed him when it mattered most.
Because Ryan pays the disability premiums personally with after-tax dollars, any benefit would be received tax-free. The business overhead expense policy is owned by the corporation; premiums are generally deductible and benefits taxable, which nets out because they reimburse deductible expenses. We told him to confirm the treatment with his accountant.
We also quoted $100,000 of critical illness insurance on a 20-year term, indicatively $50–$80 a month for his age. Ryan chose to revisit it in a year. That’s a reasonable sequence: disability first, because it covers the broadest range of events. See critical illness vs. disability insurance for how the two differ.
Underwriting took about five weeks, with a phone interview, a paramedical exam, tax documents and corporate financial statements. He was approved at standard rates for his class. For pricing context, see disability insurance cost in Canada.
What happened
About two years later, Ryan tore his rotator cuff in a recreational hockey game. Surgery, a sling, months of physio. He couldn’t pull wire, work overhead or carry a ladder for roughly five months.
WSIB didn’t apply; the injury happened at a rink, not a job site. EI wasn’t an option; he’d never opted in. Savings carried the household through the 90-day elimination period, as budgeted. The disability policy started paying in month four.
In month five he returned part-time, quoting jobs and supervising his apprentice while a subcontracted electrician did the physical work. Because his income was still well below normal, the residual benefit paid a proportion of the monthly amount for two more months. The business overhead expense policy reimbursed the van lease, insurance and the apprentice’s wages from the second month, so Ryan didn’t have to lay him off.
The episode cost the family some stress and savings. It didn’t cost them the house, the business or the apprentice.
Lessons you can apply
WSIB is not disability insurance. It’s mandatory in construction, and it doesn’t cover illness or anything off the job.
EI special benefits require planning ahead. Opt in a year before you need it, and even then it’s 26 weeks at 55%.
Your reported income is your insurable income. Talk to your accountant before buying, and before changing how you pay yourself.
Pick the elimination period your savings can cover, not the shortest one. Ninety days is often the sweet spot.
Insure the long disability, not the short one. A benefit to age 65 costs more than five years, and it’s the only one that protects against the outcome you can’t recover from.
Don’t forget the business. Fixed costs continue when you stop. Business overhead expense coverage is cheap relative to what it protects.
Trades need a broker who knows the market. Some insurers price trades well and offer decent definitions; others don’t. That isn’t visible on a single online quote.
For the fuller picture, read our guide to disability insurance for self-employed Ontarians.
How Hayes can help
If Ryan sounds like you, the process is the same: a conversation about how you’re paid and what would happen if you stopped, a comparison of insurers that actually want your occupation, and a plan built around your savings and your business. Hayes Family Insurance has worked with Ottawa tradespeople since 1996, and our advice costs you nothing because insurers pay us.
Compare quotes from 30+ Canadian insurers in about two minutes, free and with no obligation. Or contact us and we’ll run your numbers together.
Frequently asked questions
Can self-employed people get disability insurance in Canada?
Yes. Individual disability insurance is available to self-employed workers, including sole proprietors and incorporated owner-operators, from several Canadian insurers. You'll need to document your income, usually with two years of tax returns or notices of assessment and, if incorporated, corporate financial statements. Benefits are typically set at 60–70% of net earned income.
Does WSIB cover a self-employed contractor who can't work?
Only for injuries or illnesses arising from the work itself. Ontario requires most people working in construction, including many independent operators and business owners, to carry WSIB coverage, but it doesn't respond to an illness like cancer or a heart condition, or to an injury that happens off the job. Those situations are what individual disability insurance is for.
How much does disability insurance cost for a tradesperson?
More than for an office worker, because trades are placed in higher-risk occupation classes. As an illustrative range, a healthy 38-year-old tradesperson buying $4,500 a month of coverage to age 65 with a 90-day elimination period might pay roughly $190–$270 a month; a shorter 5-year benefit period or longer waiting period lowers that. Actual rates depend on the occupation, insurer, health, and the options chosen.
What is business overhead expense insurance?
It's a disability policy for the business rather than the person. If the owner is disabled, it reimburses fixed business expenses like rent, vehicle and equipment payments, utilities and employee wages for a limited period, typically 12 to 24 months, so the business survives until the owner returns or winds it down in an orderly way. Premiums are generally tax-deductible as a business expense, and benefits are taxable but offset by the deductible expenses they pay; confirm with your accountant.