Your Employer's LTD Plan Doesn't Follow You: What Self-Employed Albertans and British Columbians Lose When They Go Independent
Consider a contractor we'll call Mike.
Mike isn't one person. He's a composite of self-employed and recently incorporated professionals across Alberta and BC — the kind of client I sit down with regularly. The details change. The story doesn't.
Mike spent twelve years at a mid-sized engineering firm in Calgary. Good salary. Full benefits. He left in 2022 to start his own consulting practice — better margins, real autonomy, the work he actually wanted to do. He kept his life insurance through a private policy. He set up an RRSP through his accountant. He asked his bank about mortgage insurance and decided against it.
Eighteen months in, Mike had a stroke.
Not a fatal one. He recovered most of his function over six months. But the cognitive load of running a consulting practice — managing client relationships, switching context across complex projects, billing accurately — was beyond what he could sustain for the better part of a year. Income dropped to nearly nothing. EI sickness benefits ran out. CPP disability didn't apply because his condition wasn't deemed “severe and prolonged.” He drew down savings, then his RRSP, then his TFSA. He kept the business alive but barely.
When Mike was an employee, this exact illness would have triggered a long-term disability claim under his employer's group plan, and he would have received roughly 65% of his pre-disability income, tax-free, for the duration of his recovery. The day he walked away from that employer, that policy ended. He didn't replace it. Most people don't.
That's the gap this article is about.
What ends the day your job does
When you leave an employer to go independent, you replace some things consciously and lose other things invisibly. The conscious replacements get attention — salary, retirement contributions, sometimes life insurance. The invisible losses are the ones that hurt later.
Here's what an average employer benefits package actually contains, and what survives the day you go self-employed:
The pattern is consistent. Almost everything in a typical group benefits package ends with the employment relationship. There is no portable version. There is no equivalent of the U.S. COBRA continuation in Canada. Provincial healthcare in Alberta or BC continues — that's a public benefit, not an employer one — but everything else stops.
For most categories, the loss is manageable. You can buy private extended health. You can buy private dental. You can pay out of pocket for vision care. You can replace EFAP with private therapy if needed.
Long-term disability is different, because it's the only one of these benefits that protects something you can't replace from savings: your future earned income. And it's the one most likely to be missed — both literally (in benefits planning conversations) and figuratively (when a disability happens and there's no coverage).
The four things group LTD was actually doing for you
Most professionals who had group LTD couldn't tell you what was in the contract. That's normal — group benefits are designed to be invisible. But here's what your former employer's group LTD was actually delivering:
Income replacement. Typically 60–70% of your gross pre-disability earnings, paid monthly, often to age 65 if needed. Some plans cap at lower percentages or shorter benefit periods, but the ballpark is consistent across most Canadian group plans. For someone earning $90,000 per year, that's somewhere between $4,500 and $5,250 per month of replacement income — every month, for as long as the disability lasts.
A definition of disability that eventually becomes "any occupation." Most group LTD policies define disability as inability to perform your own occupation for the first 24 months, then shift to “any occupation” after that. The 24-month “own-occupation” window is genuinely valuable. The post-24-month “any-occupation” definition is where many long-tail group claims get denied — but for the first two years, group LTD is reasonably protective.
Underwriting on a guaranteed-issue basis. When you joined the group plan, you didn't have to medically qualify. You weren't asked about your blood pressure, your weight, your family history of cancer, or your mental health treatment record. Coverage was extended because you worked there. This is the easiest underwriting environment that exists in the disability insurance market — and the day you leave the group, you lose access to it.
Premium subsidy. Most employers pay some or all of the LTD premium on behalf of employees. The cost was hidden inside your total compensation. When you went independent, you didn't just lose coverage — you lost a quietly subsidized version of coverage.
The first three are the real losses. The fourth is just an accounting story. But together they explain why “I'll just buy what I had” is harder than it sounds.
Why “I'll buy something equivalent” doesn't work the way people think
The most common assumption when someone goes independent is: “I had great LTD at my last job; I'll get something similar.” The assumption is reasonable. The execution is harder than expected.
You have to qualify medically now. Personal LTD is fully underwritten. Insurers will ask about your health history, your family history, your medications, your mental health treatment record. Conditions you have today — or have ever had — will affect what coverage is available, what it costs, and whether certain causes of disability get excluded. The healthier you are at application, the more options you have. The longer you wait, the fewer.
You're now a different occupation class. Group LTD smoothed across an entire workforce. Personal LTD prices you specifically. A self-employed contractor with site work pays substantially more than a desk-bound consultant. A surgeon pays differently than a software engineer. The same person, doing the same kind of work, can be a different occupation class as a sole proprietor than they were as a salaried employee at a large firm — sometimes better, sometimes worse, but always priced individually.
You're now paying after-tax dollars. Most group LTD premiums were either employer-paid or paid through pre-tax payroll deductions. Personal LTD is paid with after-tax dollars from your personal account. The flip side is that benefits — when paid — are received tax-free, which is usually a better deal at claim time. But the cash-flow shock at the premium end is real.
Your income is harder to verify. Group LTD verified your income through your employer’s payroll. Personal LTD requires you to verify your own income through tax returns, financial statements, and accountant letters — particularly tricky for incorporated professionals with multiple income sources (salary, dividends, retained earnings).
None of these are reasons not to buy coverage. They're reasons to know what you're walking into before you start the process.
The income gap, in pictures
Here's what the income protection landscape actually looks like for a self-employed Western Canadian without personal LTD coverage:
EI sickness benefits cover the first 26 weeks at a maximum benefit that's well below what most professionals need to maintain their household. CPP disability becomes potentially available after a four-month qualifying period — but the bar is high enough that most short- and medium-term disabilities don't qualify, and the maximum benefit is, again, well below most professionals' household needs.
After roughly six months, for most professionals, the income from public programs falls off entirely. There is no further safety net. Personal LTD is what bridges that gap.
This is the geometry of the gap. It's why the conversation isn't really about whether to “have insurance” — it's about whether your household income survives a six-month, two-year, or career-ending illness without external income replacement.
What Mike could have done
When Mike walked away from his employer in 2022, he could have:
Applied for personal LTD coverage before leaving the group plan, while he was still healthy and working. This is the single most valuable timing decision in independent benefits planning. Underwriting outcomes are best when you're employed, healthy, and not yet on the radar for any pre-existing conditions.
Worked with an independent broker to compare carriers — not just price-shop, but actually compare definitions of disability, occupation classes, riders, and exclusions across multiple insurers. Personal LTD pricing varies substantially between carriers for the same applicant, and the right fit is rarely the cheapest.
Coordinated his coverage with his other risk-management decisions — life insurance, critical illness, his TFSA emergency fund, his business cash reserves. LTD doesn't replace any of those; it complements them. The right amount of coverage depends on what else is in place.
Mike didn't do any of this — not because he was careless, but because nobody flagged it as a priority during the months when he was making the leap. The benefits planning conversation didn't happen until after the disability did, and by then his options were severely limited.
The takeaway for self-employed professionals in Alberta and BC
If you're reading this and you've made the leap from employee to self-employed or incorporated within the last few years — or you're planning to make the leap soon — the question isn't whether your former group LTD was a good plan. It almost certainly was, for what it was. The question is what you've replaced it with.
For most independent professionals in Alberta and BC, that answer is: nothing.
Replacing it isn't complicated. It requires sitting down with an independent broker, getting properly underwritten, comparing actual contracts across carriers, and choosing a policy structure that matches your specific occupation, income, and household needs. It's a couple of hours of focused work in exchange for the peace of mind that a six-month illness doesn't drain your retirement savings.
The longer you wait, the harder it gets. Health changes accumulate. Conditions develop. Premiums rise with age. The best time to buy personal LTD is when you don't think you need it — and the worst time is the moment you realize you do.
If you're self-employed or incorporated in Alberta or British Columbia and you don't have personally-owned LTD coverage in place, the next step is straightforward: find out what coverage looks like for your specific situation, what it would cost, and whether you currently qualify medically.
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