Case Commentary – How Self-Employment Impacts Income Replacement Benefits


If you are seriously injured in a car accident, you may be unable to work, and eligible to claim income replacement benefits as part of your accident benefits coverage. These benefits are intended to provide some compensation for lost wages while you are recovering from your injuries.

Calculating the amount of your income replacement benefits (IRBs)

As we discussed last week, to qualify for income replacement benefits you must have been employed on the date of the accident, and be substantially unable to work as a result of your injuries. IRBs are calculated based on your income in the 52 weeks prior to the accident, based on your weekly salary, and reported annual taxable income to the Canada Revenue Agency. The maximum amount payable is 70% of your pre-tax income, to a maximum amount of $400, although additional insurance can be purchased to increase this ceiling.

If you earn any income while receiving IRBs, this will be deducted from your payments. If you are eligible for disability or income replacement through any other benefit or insurance plan, this will also be deducted from your accident benefits IRBs.

How self-employment income impact income replacement benefits – Perth Insurance Co. and Surani, Re

Most often, your employment status before the accident, and your salary, is confirmed through your employer. However, for small business owners, independent contractors and other self-employed individuals, it can be more complicated to clearly establish your weekly or annual income. Furthermore, if the business continues to earn passive income while you are unable to work, should this be deducted from your income replacement benefits?

This case was an appeal of an arbitrator’s decision that the business income earned after an accident should not be deducted from a pharmacist’s IRB payments. On appeal, it was confirmed that a self-employed person’s income for the purpose of calculating their IRB entitlement is based on the profit from their business. Accordingly, any business profits earned after the accident are income, and properly deductible from income replacement benefits.

Legal advice for self-employed individuals after a car accident

If you are self-employed, it can be a challenge to both establish your eligibility for IRBs, and ensure that they are calculated fairly. At Jasmine Daya & Co., we have decades of experience assisting car accident victims with their claim for benefits. We know that the financial strain after a serious injury can be immense, and work diligently to ensure our clients get full and fair compensation.

We give free consultations for all new clients. To discuss an accident benefits or any other insurance matter with one of our lawyers, contact us online, or by calling 416-967-9100.