The tax treatment of disability insurance premiums and benefits turns on who pays the premium.
Employee-paid individual policy (personal disability income): when an individual buys a personal disability income policy and pays the premiums from after-tax dollars, the Canada Revenue Agency (CRA) treats the benefits received as non-taxable. The logic is symmetrical: no tax deduction was claimed on the premiums, so no tax is payable on the benefits.
Individual premiums are not deductible: a self-employed individual or an employee paying for personal disability coverage cannot deduct those premiums from income. The premium is paid with after-tax money.
Summary rule (individual): after-tax premium paid, benefit received tax-free.