Group LTD vs Personal Disability Insurance
Direct answer
AEC Benefits places both group and personal disability coverage for Ontario construction employers. A group LTD plan and a personal disability policy are not the same protection wearing different labels. Group LTD is built for employees and is a strong, affordable base layer. Personal disability insurance is owned by the individual, is portable and tax-free when personally funded, and can be sized to an owner-level income. For most construction owners the honest answer is that group LTD is necessary but not always sufficient on its own.
Key Takeaways
- •Group LTD is affordable and easy to access but is usually capped, can be taxable, and ends when you leave the employer or sell the business.
- •Personal disability insurance is portable, can be own-occupation, pays tax-free when you fund it personally, and can cover income above the group maximum.
- •The two are often best used together: group LTD as the base, personal coverage as the top-up that protects an owner-level income.
Is group LTD enough, or do you need a personal policy? How the two compare for Ontario construction owners and high earners.
| Criterion | Option A | Option B |
|---|---|---|
| What it is | Group LTD (employer plan) | Personal disability insurance (individual policy) |
| Income replacement | Often ~60 to 67% up to a monthly maximum that can under-cover owners | Sized to your actual income, including above group limits |
| Tax on benefits | Often taxable when the employer pays the premium | Generally tax-free when you pay the premium personally |
| Definition of disability | Often shifts to any-occupation after about 24 months | Own-occupation or regular-occupation options available |
| Portability | Ends if you leave or sell the business | Stays with you regardless of the business |
| Stability | Plan can be changed or cancelled by insurer or employer | Can be non-cancellable and guaranteed renewable |
| Best role | Affordable base layer for the whole team | Owner and high-earner top-up that closes the gap |
Where group LTD quietly falls short for owners
Group LTD is genuinely valuable and most construction employers should offer it. The issue is not quality, it is fit for the owner. The monthly maximum that works fine for a junior office role can leave a higher-earning owner protecting only part of their income.
Two other details catch owners off guard. First, when the company pays the LTD premium, the benefit is usually taxable in your hands, so a 60 percent benefit can feel more like 40-something percent after tax. Second, the coverage is tied to the plan, so selling the business or changing structure can end it exactly when you still need protection.
How to decide what you actually need
- Start from your real income, then check what percentage of it the group plan truly protects after the monthly cap and after tax.
- Decide how much it matters that coverage is own-occupation and cannot be cancelled, which is where personal policies are stronger.
- Treat personal disability insurance as the top-up layer that closes the gap between the group maximum and an owner-level income, rather than a replacement for the group plan.
Reviewed by Steffen deGraaf
Steffen brings 20+ years in insurance and group benefits, construction job-site roots, and architectural technology training at Mohawk College. FSRA-regulated insurance broker specializing in Ontario group benefits.
Ontario Insurance
Ontario construction benefits experience
Construction is in Steffen's blood: job sites as a teenager, architectural technology at Mohawk College, and 20+ years in insurance and group benefits for Ontario employers.
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Frequently Asked Questions
Is group LTD enough on its own?
For many employees, yes. For owners and higher earners, often not, because the monthly maximum, possible taxation of benefits, and lack of portability leave a meaningful gap between what the plan pays and what an owner-level income needs.
Why are group LTD benefits sometimes taxable?
When the employer pays the LTD premium, the benefit is generally taxable when received. When the employee pays the premium with after-tax dollars, the benefit is usually tax-free. This single detail can change how much income you really keep on a claim.
Should I drop my group plan if I buy personal coverage?
Usually no. Group LTD is an affordable base layer for the whole team, including you. The common approach is to keep it and add a personal policy that tops up an owner-level income, then coordinate the two so they work together.
Related Pages
Want to talk through your options?
If you want real numbers instead of generic plan talk, AEC Benefits can pressure-test pricing, structure, and fit for your team.