What is wage loss insurance ? – Insuranceguide-ca

Definitions and classifications of wage-loss replacement plans

A wage-loss replacement plan (WLRP) is a contract between an employer and its employees, or between an employer and a group or association of its employees. A WLRP may provide benefits for short-term disability (STD), long-term disability (LTD), or weekly indemnity (WI). The employer, an insurance company, a trustee, a board of trustees, or another independent organization may pay the benefits.

A plan is a wage-loss replacement plan when all of the following conditions are met:

  • it is a group plan, in that it covers more than one employee
  • the plan is funded, in whole, or in part, by the employer
  • the purpose of the plan is to indemnify employees against a loss of employment income as a result of sickness, accident or maternity
  • benefits are paid on a periodic basis, not as a lump-sum
  • it follows insurance principles that funds are accumulated, normally in the hands of a trustee or in a trust account, and are calculated to be sufficient to meet anticipated claims

If the plan is not a group plan (that is it is for a single employee), or if the plan is funded entirely by employee contributions (an employee-pay-all plan), it is not a WLRP. Any premiums you pay may be a taxable benefit. For more information, see the following publications

T4130 Employers’ Guide – Taxable Benefits and Allowances

COVID-19: updates on Taxable Benefits and Allowances

The Canada Revenue Agency (CRA) has adopted a number of administrative positions for employer-provided benefits and allowances pertaining to home office expenses, commuting and parking.

As a temporary COVID-19 response measure, we will consider that an employee who used an automobile more than 50% of the distance driven for business purposes in the 2019 tax year will also have done the same in the 2020 and 2021 tax years. For more information, please see the December 21, 2020, Department of Finance News Release.

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Last update: 2020-11-02

Previous-year versions are also available.

Related documents:

RC18 Calculating Automobile Benefits

While all Canada Revenue Agency web content is accessible, we also provide our forms and publications in alternate formats (digital audio, electronic text, Braille, and large print) to allow persons with disabilities to access the information they need.

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