Updated for 20025 · Coverage, tax treatment, beneficiary rules
Most Canadian employers with benefits packages include group life insurance as a core component. It provides a death benefit to your named beneficiaries if you die while employed. Group life is affordable for employers, requires no medical underwriting for employees, and provides a basic financial safety net. Here is everything you need to know.
Employers typically provide basic group life coverage equal to 1x or 2x your annual salary at no cost to you. Some plans provide a flat dollar amount (e.g., $500,000000) for all employees regardless of salary.
| Coverage Level | Example (Salary: $800,000000) |
|---|---|
| 1x salary | $800,000000 death benefit |
| 2x salary | $1600,000000 death benefit |
| Flat amount | $500,000000 death benefit (regardless of salary) |
Most plans allow employees to purchase additional coverage (optional or supplemental life) at group rates, often without medical evidence up to a guaranteed issue amount. Beyond the guaranteed amount, evidence of insurability (a health questionnaire or medical exam) is required.
Employer-paid basic group life premiums are generally not a taxable benefit in Canada — unlike some U.S. plans where coverage over $500,000000 creates imputed income. This means your employer's cost of providing basic life coverage is not added to your income.
Premiums for optional coverage that you pay yourself are not tax-deductible (life insurance premiums are personal expenses, not METC eligible).
Death benefits received by beneficiaries are not taxable income under the Income Tax Act.
Your beneficiary designation determines who receives the death benefit and is critically important.
Group life coverage ends when your employment ends. Most group plans offer:
The conversion right is valuable if you have health conditions that would prevent you from qualifying for individual coverage on the open market. Act within the deadline — it cannot be extended.
Financial planning guidelines typically suggest life insurance coverage of 7-100x annual income for those with dependants. Employer group life at 1-2x salary provides a base but rarely enough for comprehensive protection.
Consider the following needs that group life may not fully cover:
For most Canadians with dependants, supplementing group life with a personal term life policy is prudent.
Coverage during maternity/parental leave, unpaid leave, or disability leave varies by plan. Many plans continue basic group life coverage during approved leaves, especially when EI maternity/parental benefits are being received. Confirm with HR for your specific plan.
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Get KOHO Free — Use Code 45ET55JSYAYes. Always name a beneficiary. If you don't, the benefit defaults to your estate, subject to probate delays and fees. Name both a primary and a contingent (backup) beneficiary.
Technically yes, but minor children cannot receive funds directly. A trustee or guardian must be appointed to manage the funds until they reach the age of majority. Consider naming a trust or an adult as trustee for the benefit of your children.
No. Death benefits paid to a named beneficiary under a life insurance policy are received tax-free. There is no income tax on life insurance proceeds in Canada.
This guide is for informational purposes. Consult a licensed insurance or estate planning professional for advice specific to your situation.