Long-term disability benefits may be taxable depending upon who paid the benefits. Many workers have group disability policies with companies like Manulife, Sun-Life, Great West Life or RBC, amongst others.

If the employer pays part or all of the premiums for the long-term disability policy the benefits will be taxable. If the worker pays all of the premiums the benefits are not taxable as the premiums would have been paid with after tax dollars.

When a disability insurance company terminates or denies the payment of long-term disability benefits a law suit can be commenced. Often the case is settled by way of a lump sum settlement. If the benefits would ordinarily have been taxable and the case settles by way of a lump sum settlement the monies allocated to past benefits will be taxable. The funds allocated to future benefits will not be taxable. Of course for non taxable policies there will not be any taxation of lump sum settlements.

Often during negotiations an attempt can be made to allocate less to past benefits and more to the future if taxation is an issue. The disability insurance company will withhold a percentage of the settlement if part of it is taxable. A disability lawyer will be able to assist in negotiating to minimize the tax consequences.

At Kotak Law our disability insurance lawyers have been successful in securing large lump sum settlements for our clients who suffer from illnesses such as chronic pain, depression, anxiety, post traumatic stress disorder, fibromyalgia, colitis, cancer, crohns, IBS, or even stress alone.


We understand that being denied short-term disability benefits or long-term disability benefits can be frustrating and devastating. Your time to fight your disability insurance company is limited. Please do not delay in calling a disability claim lawyer at Kotak Law. We have successfully sued numerous disability insurance companies including Manulife, Sunlife, Desjardins, Great West Life, Canada Life, London Life, Blue Cross, AIG, SSQ, RBC, Industrial Alliance and more.

Call your trusted long term disability lawyers at 1-888-GOKOTAK (Toll Free for all of Canada), or (416) 816-1500 (Local Number for Ontario Residents), (403) 319-0071, (587) 414-1010 (Local Numbers for Alberta Residents). Our consultation is free and we don’t get paid until you do. We can meet you at our offices, a coffee shop, your home or a local court house. We can meet electronically though Skype, Zoom or WebEX. We represent disabled people throughout Ontario and Alberta, including Toronto, Mississauga, Brampton, Milton, Georgetown, Orangeville, Oakville, Burlington, Hamilton, St.Catharines, Niagara Falls, Stoney Creek, Kitchener/Waterloo, Cambridge, London, Windsor, Markham, Pickering, Oshawa, Peterborough, Keswick, Kingston, Ottawa, Banff, Brooks, Calgary, Edmonton, Fort McMurray, Grande Prairie, Jasper, Lake Louise, Lethbridge, Medicine Hat, Red Deer, Saint Albert and other locations.

Disclaimer: This article is intended to supply general information to the public. We make every effort to ensure the accuracy of this information. However, as laws change quickly, the reader should always ensure the accuracy and applicability of such information with respect to their particular case. The information contained in this article cannot replace a thorough and complete review of the reader’s situation by competent legal counsel who has had an opportunity to review all of the facts.