Life insurance is a smart investment. It provides you peace of mind and your family with a strong sense of security.
About 62% of Canadians have a life insurance policy through their employer. That is, they are covered by a small life insurance policy and their employer pays the life insurance premiums.
For businesses that pay employees’ life insurance premiums, there may be an added benefit. These premiums could be considered a business expense and can be used as a tax deduction. And if you fit the criteria, it can make buying life insurance more attractive.
Types of Life Insurance
Term Life Insurance
Permanent Life Insurance
When Are Life Insurance Premiums A Business Expense?
Canada’s Income Tax Act is very complex so it’s always best to check with a tax professional. However, there is a section of Canada’s Income Tax Act that allows you to deduct life insurance premiums if you’re a business. There are some conditions that need to be met:
1. The life insurance policy is used as collateral for a loan that is being used for business purposes.
2. Interest paid would be tax-deductible as part of the business income for the year.
If the conditions are met, you’ll be able to use insurance costs as tax deductions.
How Much Insurance Costs Can You Deduct?
How much you’ll be able to deduct will be the lesser of the premiums payable or the net cost of pure insurance (premiums minus savings).
Basically, as a business owner, if you’re offering life insurance to your employees the insurance premiums are considered a business expense.
100% of insurance premiums a creditor requires you to have to enforce to secure a loan.
Can You Write Off Life Insurance?
When You Can't Use Premiums As Tax Deductions
How To Claim Life Insurance Premiums As A Business Expense
Business owners who pay life insurance premiums for employees can use them as a tax deduction. Benefits like life insurance are considered in the cost of doing business.
You’ll need to report the total amount you pay for premiums annually as part of your total business expenses. In other words, it will be grouped together with all your business expenses for the year.
Deducting Group Life Insurance Policy Premiums
Are Charitable Life Insurance Premiums Deductible?
Some insurance policies can be purchased, and a charitable organization appointed as the beneficiary. Premiums paid for this insurance policy can be claimed as a charitable donation.
However, it won’t be considered a tax deduction but rather a tax credit. To apply the tax credit to your business’ income tax return you’ll need the receipt for your insurance premiums.
Additional Life Insurance Coverage Benefits
Business As A Beneficiary
Buy-Sell Agreements
Why Buy Life Insurance From Shelter Bay?
With Shelter Bay, you’re getting more than just another life insurance company. Our agents work with you to determine your needs and the best policy for you and your business. Collectively, we have over 200 years of insurance industry experience. You can be confident when you’re working with Shelter Bay that you’re getting the best advice and the best price on life insurance.
Whether you’re looking for life insurance benefits for your employees or want a policy for yourself, contact Shelter Bay for a free quote today.