Is small business insurance tax deductible in Canada?

This article was originally published on November 21, 2023, and was updated on February 19, 2026.

Leveraging tax credits and deductible expenses is a fundamental practice for Canadian business owners who are looking to save on their annual taxes. Understanding what you can and can’t deduct from your taxes is important knowledge for running any successful business, such as whether you can claim a business insurance policy as a deduction. We know it can be challenging, especially for small business owners, to determine which expenses are tax-deductible and which are not, so to help, we’ve put together this handy guide containing everything Canadians need to know about business insurance-related tax deductions.

What is a tax deduction for small businesses?

A tax deduction for a business refers to claiming a business expense that lowers the business's taxable income. Doing this reduces the tax the company must pay to the Canada Revenue Agency (CRA). 

The CRA states that you can deduct any reasonable expense you incur to earn income. While the size and proportion of these deductions vary, the CRA provides a thorough list of tax-deductible business expenses. Eligible expenses include advertising costs, maintenance and repairs, legal and accounting fees, and insurance. 

Is small business insurance tax deductible in Canada?

Yes, small business insurance is tax deductible in Canada. According to the CRA, commercial insurance premiums businesses pay for property, equipment, or machinery used to operate the business are tax deductible, meaning they can be deducted from the business’s taxable income.

What types of business insurance are tax deductible?

Every business is different, so the types of commercial insurance premiums you can deduct will also differ. Below are a few business insurance policies that could be written off, but it’s always best to consult a tax professional when preparing your return.

• Commercial property insurance – This protects a business from expenses incurred by theft, loss of inventory, or physical damage to the business premises.

• Error and omissions insurance – This protects a business from expenses that may be incurred because of a mistake made by the business or its employees.

• Key person life insurance – This will be discussed in more detail below, but in general, it is an insurance policy often required by a lender to protect their financial interests in the event of a key person’s death.

• General liability insurance – This protects a business from claims made against it by members of the public for various events, such as an injury on business premises.
  

• Business interruption insurance – This protects your income stream if you need to temporarily shut down (due to a flood or fire). 

Is life insurance for small businesses tax deductible?

Yes, life insurance premiums can be tax deductible for a small business in two main scenarios.

1. If a business provides employees with life insurance as part of its total group benefits package and includes this insurance as a taxable benefit, its premiums are tax deductible.
2. If a business uses a life insurance policy as collateral for a loan related to the business. For example, it's common for a lender to require a business to provide life insurance policies on key employees, such as the CEO, CFO, or company founder. These policies are used as loan collateral, ensuring that the lender is compensated for potential losses if a key business contact dies. In this case, a limited part of the life insurance premiums may be deducted. 

Also read: Is life insurance tax deductible?

Are other types of insurance tax deductible for small businesses?

Yes, other types of insurance are tax deductible for small businesses, including auto and home insurance. 

Auto Insurance: If a vehicle is used to generate income for the business, expenses incurred to operate and maintain that vehicle are tax deductible, including the insurance premiums. This deduction should be claimed along with the other costs related to your car. 

Also read: Is car insurance tax deductible in Canada?

Home insurance: Operators of home-based businesses can deduct a portion of their home insurance premiums from their taxable income. The portion of the tax-deductible premiums will depend on the percentage of the home being used exclusively for business purposes. Small business owners cannot deduct home insurance premiums from their taxable income if a business is operated outside of the home.

Also read: Is home insurance deductible in Canada?

The bottom line

Taxes are a significant consideration for anyone who owns or operates a business. While every type of insurance is different, small business insurance is often tax deductible in Canada. However, it’s always a good idea to consult with a tax professional to ensure you’re claiming deductions correctly and maximizing your eligible write-offs. 

Remember that keeping accurate records of your receipts and invoices is essential for backing up your claims and staying organized when tax season rolls around.

For information about insurance and taxes, visit our insurance tax guide. 

Also read

• Filing Canadian taxes: Everything you need to know
• A guide to tax write-offs for self-employed Canadians
• Is it illegal not to have business insurance?