Are life insurance premiums tax-deductible?

In most cases, life insurance premiums aren’t tax-deductible — even for individuals or businesses who can deduct other kinds of insurance. But you might be able to write your premiums off as a business expense if the coverage is an employee benefit.

Find out whether life insurance premiums are taxable for these key groups

Whether or not life insurance is taxable will depend on which of the following groups you find yourself in.

Individuals

Unfortunately, life insurance premiums paid by individuals are not tax-deductible. That’s because life insurance policies are considered personal expenses — so they’re not eligible for tax deductions.

Self-employed and sole proprieties

In most instances, self-employed individuals and sole proprietors are treated the same way for tax purposes – which is the case when it comes to deducting life insurance premiums. If you’re self-employed or a sole proprietor it might be easy to think that life insurance can be written off as a business expense, but that’s not necessarily the case. The Canada Revenue Agency (CRA) won’t view life insurance as a necessary business expense in most scenarios, so you won’t be able to deduct any premiums you paid for coverage.

Businesses

If an employer paid the life insurance premiums on a group plan, then the premiums are tax deductible. You’ll still have to show that the expenses are a reasonable business expense.

If the business is a beneficiary or receives any type of compensation when the employee or an employee’s dependent dies, the premiums are not deductible. This includes business-owned life insurance policies taken out on behalf of employees. Though this type of insurance can provide protection against the loss of a key employee, monthly premiums are not tax-deductible.

Compare quotes from top life insurance companies

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Name	Product	Types of Insurance	Coverage Range	Issue Ages	Medical Exam Required	Province Availability
PolicyMe Life Insurance		Term Life, Critical Illness	$100,000 - $5,000,000	18 - 75	No	AB, BC, MB, NS, ON, PEI, SK, NL, YT, NT, NU	Get fast and affordable term life insurance. Personalize your policy details and get an estimate price within seconds. No phone call, meeting or paperwork required. Get an instant decision.	Get a quote More Info	Compare	loading Fetching your data...
RBC Life Insurance		Term Life	$50,000 - $1,000,000	18 - 70	No	AB, NS, ON, PEI	Select from two unique RBC term life insurance plans to get flexible and affordable coverage that suits your lifestyle and budget. Get a free quote through Walnut.	Get a quote More Info	Compare	loading Fetching your data...
PolicyAdvisor		Whole Life, Term Life, Universal, No Medical	$25,000 - $25,000,000	18 - 75	No	AB, BC, MB, ON	PolicyAdvisor is a digital life insurance brokerage that has partnerships with 20 insurers in Canada.	Get a quote More Info	Compare	loading Fetching your data...

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Bottom line

For the most part, life insurance premiums are not tax-deductible, but there are a few exceptions. If you’re an individual or a business owner, it’s worth consulting a licensed accountant for any tax-related questions, as they can offer the most accurate advice based on your situation, and help get all of your eligible deductions.

When you’re ready to purchase a policy, compare life insurance providers to get the best possible deal for your needs.

Frequently asked questions

• Will I be taxed on the cash value accumulation of a permanent life insurance policy?

  Yes — but not annually. Permanent life insurance policies have two components: the death benefit and the cash value. The cash value portion is placed in a separate account and accumulates interest over time. Like any other interest-based income, it’s subject to taxes. However, the earned interest is tax-deferred, so you won’t pay taxes on it until you cash out.

• What is group life insurance? Are premiums tax-deductible?

  Group life insurance is employer-subsidized life insurance. It’s typically offered as an employee benefit, and the employer can claim the premiums they paid as tax deductions.

  In some cases, the employer may be listed as a co-owner or at least a partial beneficiary of the policy. Since the employer stands to gain from this contract and it’s not an essential operating expense, premiums would not be tax-deductible.

• What is a key man life insurance policy?

  A company takes out a key man life insurance policy to protect losses from the death of valuable partner, manager or owner whose skills are vital to the success of the company. The individual doesn’t hold the policy — the company is both the owner and the beneficiary.