Canadian insurance tax guide: Are your insurance premiums tax deductible?

Are life insurance premiums taxable? Generally, the answer is no. However, there are circumstances when they could provide tax advantages. For instance, if your policy has an investment component, it can grow tax-deferred and enhance the value of your estate. However, once the cash value is withdrawn, you will pay taxes on the earnings. In certain instances, such as using the policy as collateral for a loan, you may be able to deduct part of your premiums.   

Understanding how and when life insurance expenses can have tax advantages will help you get the most from your coverage while lowering your tax burden.

Here are helpful resources about life insurance and taxes: 

• • Is life insurance tax deductible?
  • How to use life insurance for tax and estate planning

If you own or drive a car in Canada, you’re likely considering whether your auto insurance payments are tax-deductible. The good news is that you can deduct car insurance from your taxes if you use your vehicle for business.

Self-employed Canadians, commission-based employees, and some salaried employees can claim auto insurance and other vehicle expenses, such as gas, maintenance, and repairs. As with all tax claims, there are limits to what can be deducted. Auto insurance is based on how often you use your vehicle for work. 

Discover how to save on car insurance and minimize tax deductions: 

• Is car insurance tax deductible in Canada?

There are a few instances where you can deduct home insurance premiums from your taxes, but there are conditions you’ll need to meet. If you are self-employed or a commission-based employee working from home, you can deduct a portion of your home insurance as a home office expense, based on the space in your home you use exclusively for work. 

Landlords can also write off insurance premiums on a rental property, including insurance on the building and its contents. However, tenant insurance is not tax deductible for most renters, unless the home is used for work.

Also read: How tenant insurance helps landlords and tenants lower their risk

Here are educational resources about home insurance and taxes: 

• Is home insurance deductible in Canada?
• Can I claim home or tenant insurance on my taxes? A guide for landlords and renters

If you are an avid traveller, you will be pleased to learn that you can claim a portion of your travel insurance premiums as a Medical Expense Tax Credit (METC) on your tax returns. This applies if 90% or more of the premiums cover eligible expenses. Note that only the medical coverage in a travel insurance policy qualifies. So, trip cancellation, baggage insurance, and other travel expenses cannot be written off.

Learn how to deduct travel insurance from your taxes:

• Is travel insurance tax deductible in Canada? What you need to know.

Some health insurance premiums are tax deductible when claimed under the Medical Expense Tax Credit. For example, if you pay for private health insurance, you can claim those expenses, as long as 90% or more of the premiums are for eligible medical costs. However, your group benefits paid for by your employer are not an eligible deduction. 

Explore our guide to health insurance and taxes: 

• Is health insurance tax deductible in Canada?

Self-employed business owners, entrepreneurs, and freelancers can take advantage of certain insurance tax write-offs when filing income tax returns. For example, you can deduct insurance premiums for auto, home and small-business insurance based on the portion you use exclusively for business. However, there are restrictions to be aware of, including limits to what you can claim.

Discover how to save on taxes as a business operator: 

• Is small business insurance tax deductible in Canada?
• An ultimate guide to insurance tax write-offs for self-employed Canadians