Business Insurance Tax Deduction
Which business insurance premiums are deductible, and which personal policies are not.
The short version
- Premiums for insurance that protects the business are deductible on line 8690 of form T2125: liability, property, equipment, tools, business interruption, cyber and professional liability (errors and omissions).
- Vehicle insurance goes in the motor vehicle expenses, at the business-use percentage. Home insurance goes in the business-use-of-home calculation.
- Your own life insurance, disability insurance and critical illness insurance are generally not deductible for a sole proprietor.
- Life insurance required as collateral for a business loan can be partly deductible, under strict conditions.
- Health and dental premiums can be deductible for a self-employed person under a qualifying private health plan, with limits.
Can You Deduct Business Insurance?
Insurance is the expense nobody enjoys paying and everybody is glad they paid. On the tax side, the rule is simple: if it protects the business, it's deductible. If it protects you as a person, it usually isn't. A few exceptions are worth knowing, especially for health plans.
What's Deductible
| Insurance | Treatment |
|---|---|
| Commercial general liability | Deductible, line 8690 |
| Professional liability, errors and omissions, malpractice | Deductible, line 8690 |
| Tools, equipment and inventory coverage | Deductible, line 8690 |
| Business premises, contents, business interruption | Deductible, line 8690 |
| Cyber liability, bonding, WSIB-style coverage for the business | Generally deductible |
| Vehicle insurance | Through motor vehicle expenses, business-use share; see vehicle expenses |
| Home insurance | Through business-use-of-home; see home office |
| Your own life, disability or critical illness insurance | Generally not deductible |
| Life insurance assigned as collateral for a business loan | Possibly, part of the premium, if the lender requires it |
| Private health and dental plan for yourself | Can be deductible within limits, if conditions are met |
Disability Insurance: The Trade-Off
Personal disability premiums aren't deductible, which sounds bad, until you need it: benefits from a policy you paid for yourself, with after-tax money, are generally tax-free. Most advisers would rather have the tax-free benefit than the deduction.
Health and Dental Plans for the Self-Employed
A self-employed person who gets most of their income from the business can deduct premiums for a qualifying private health services plan, within annual limits, instead of claiming them as medical expenses. The deduction is usually worth more than the credit. The limits depend on how many people the plan covers and whether you have employees; this is worth checking with your insurer or accountant.
Which of your policies are deductible?
List your policies and premiums. The assistant tells you which are business deductions, which go through vehicle or home costs, and which are personal.
WSIB and Workers' Compensation
Provincial workers' compensation premiums for your workers are deductible. In some provinces, contractors can buy optional coverage for themselves; those premiums are generally deductible as a business expense too. Rules vary by province, so check yours.
Keep the Proof
Keep the policy declarations page and the premium invoices or statements. If a single policy covers both business and personal items (a homeowner's policy with a business rider), split the premium on a reasonable basis. See receipts to keep. Where insurance sits on the form is on T2125 explained; the other expense lines are on business expense deductions.
Return Check flags personal insurance claimed as a business expense, a common adjustment in CRA reviews.
Business Insurance Questions
Is business insurance tax deductible in Canada?
Yes. Premiums for insurance that protects the business, such as liability, property, equipment and professional liability coverage, are deductible on line 8690 of form T2125.
Can I deduct my life insurance as a business expense?
Generally not. An exception can apply to part of the premium when a lender requires the policy as collateral for a business loan.
Are disability insurance premiums deductible for self-employed people?
Generally not, but benefits from a personal policy you paid for are usually tax-free.
Can self-employed people deduct health insurance?
Premiums for a qualifying private health services plan can be deductible within limits if most of your income comes from the business.
Sources: CRA, Expenses section of form T2125 (line 8690); Guide T4002. Checked October 2026. The life insurance collateral rule, private health plan limits and workers' compensation rules are summarized; conditions apply.
Last reviewed October 4, 2026 against CRA and Government of Canada sources. How we check our facts.