Is small business insurance tax deductible in Canada?

This article was originally published on November 21, 2023, and was updated on March 7 2025.

Small business insurance offers protection from financial losses caused by unexpected events. These events could include damage to property, an inability to operate, or claims made against the business for an injury, mistake, or omission. While this protection could save your company someday, it is still a significant up-front expense.

Many business operators wonder if they can claim their business insurance as a tax deduction during tax season. It can be challenging 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?

When people talk about a tax deduction for a business, they are referring to claiming a business expense that lowers their taxable income. Doing this reduces the tax the company must pay to the Canada Revenue Agency (CRA). 

According to Canada’s Income Tax Act, a business expense is tax deductible if it is incurred for the express interest of generating income for the business. 

While the size and proportion of these deductions can vary, the CRA provides a thorough list of tax-deductible business expenses.

There is a wide range of items and services that are tax deductible for businesses. These include marketing expenses, property repairs and maintenance, asset depreciation, legal and accounting fees, and insurance. 

Is small business insurance tax deductible in Canada?

In short, yes. 

According to the CRA, insurance premiums businesses pay to cover any 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 small 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?

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 benefits package and includes this insurance as a taxable benefit, its premiums are tax deductible.
2. It’s common for a lender to require a business to provide key life insurance policies on business associates like the CEO, CFO, or company founder. These policies are used as collateral for a loan, ensuring that the lender is compensated for potential losses that could be incurred 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?

In short, yes. Other types of insurance are tax deductible for businesses – these include:

Auto Insurance

Car insurance covers expenses related to theft, vandalism, or motor vehicle collisions. These expenses could include damage to your vehicle, damage to the property of any third parties, your medical expenses, and third-party claims made against you if others are injured in a motor vehicle crash.

If the 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?

Travel insurance

While all travel insurance policies differ, most provide protection from financial losses incurred by trip cancellation, interruption, lost or stolen baggage, and medical care for injuries or illnesses that occur during the trip. 

If you are traveling to generate income for your business, the medical portion of your travel insurance premium could be tax deductible. 

Also read: Is travel insurance tax deductible?

Home insurance

Home insurance protects against expenses incurred when your home and its contents are damaged or lost due to unexpected events, such as theft, vandalism, fire, and flooding.

Small business owners cannot deduct their home insurance premiums from their taxable income if a business is operated outside of the home.

However, operators of home-based businesses can deduct a portion of their home insurance premiums from the taxable income. The portion of the tax-deductible premiums will depend on the percentage of the home being used exclusively for business purposes.

Also read: Is home insurance deductible in Canada?

The bottom line

Taxes are a significant consideration for anyone who owns or operates a business. The amount of taxes a business pays affects the net profit left at the end of the year. 

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
• E-commerce insurance: how to protect your online business
• Is it illegal to not have business insurance?
• What are the 4 types of business insurance?
• How to use life insurance for tax and estate planning