Key points
- Life insurance pays a sum to the people you name when you die; disability insurance replaces part of your income while you can't work; critical illness insurance pays a lump sum on a covered diagnosis.
- Premiums for personal cover are generally not deductible, and the benefits are generally tax-free when you own and pay for the policy yourself.
- Group cover at work helps, but it is usually tied to the job and some of it is a taxable benefit.
- A needs estimate (debts, income, dependants, goals, less what you have) is the usual starting point; our insurance needs calculator gives a general one for life cover.
- A licensed agent advises on products and cover; Finvo covers the tax side.
Three risks, three kinds of cover
Most personal insurance questions come down to three events a family can't easily absorb from savings. Thinking about them one at a time makes it clearer which cover answers which worry.
| Cover | Pays when | How it pays |
|---|---|---|
| Life insurance | You die while the policy is in force | A lump sum to the people you name |
| Disability insurance | Illness or injury stops you working, after a waiting period | A monthly benefit, usually part of your income |
| Critical illness | You are diagnosed with a condition the policy lists and meet its terms | A lump sum to you |
Couples often ask about cover for the other partner too, including a partner who stays home with children, because replacing unpaid work such as childcare also costs money. Business owners have a further set of questions about cover held through the company; see business insurance.
A sensible order to think it through
- Who depends on your income? Children, a spouse or partner, a parent you support. The more people and the longer they depend on you, the bigger the question.
- What would stop if you couldn't work? Many people are more likely to face a long illness or injury during their working years than to die during them, which is why disability cover is often discussed alongside life cover.
- What do you already have? Group cover at work, mortgage or loan insurance from a lender, savings and government programs such as EI sickness benefits and the CPP. Write them down before you look at anything new.
- What is left uncovered? That gap is what a licensed agent works through with you, product by product.
Personal insurance and tax
- Premiums you pay personally for life, disability or critical illness cover are generally not deductible on your return. One narrow exception: part of a life insurance premium can be deductible when a lender requires the policy as collateral for a business or investment loan.
- Life insurance death benefits are generally paid tax-free to your beneficiaries.
- Disability benefits are generally tax-free if you paid the whole premium yourself, and taxable to the extent your employer paid it.
- Critical illness benefits from a policy you own and pay for are generally received without tax. Employer-paid critical illness premiums are a taxable benefit to the employee.
- Group term life premiums your employer pays are a taxable benefit and appear on your T4.
Who owns the policy, who pays and who receives the money all change the answer, which is why these are worth settling before a policy is put in place.
Where savings plans fit
Insurance and savings work together. An emergency fund in a TFSA can carry you through a disability waiting period; an RRSP builds retirement income but is taxed when it is withdrawn, including at death unless it passes to a spouse or partner. For the estate side, including probate and beneficiary designations, see estate planning.
Where Finvo fits
We look after the tax side of personal cover: whether a premium is deductible or a taxable benefit, how a disability benefit is reported, how a policy fits your budget and your tax return, and what your estate may owe. Our tax-side financial planning looks at insurance alongside RRSPs and TFSAs.
Finvo itself does not sell insurance or give insurance advice. Finvo can connect you with a licensed insurance agent from our partner network who can help with insurance advice if you need it. The licensed agent advises on products and coverage; Finvo covers the tax side. Insurance and other specialists are joining Finvo as contractors, so a group of consultants can work on your file together and you don't have to go from place to place.
Whoever you deal with, you can check that an agent is licensed: in British Columbia with the Insurance Council of BC licensee directory, and in Alberta with the Alberta Insurance Council agent lookup.
This page is general information, checked against the sources below on 5 Nov 2026. Every policy and plan has its own terms; it isn't insurance, tax, investment or legal advice for your situation.