Can Self-Employed Canadians Deduct Business Insurance Premiums?

Insurance Is a Real Business Expense

A common gap in freelancer tax content is insurance. Canadian sole proprietors often ask: can I deduct professional liability, errors and omissions, cyber, equipment, or business property insurance? Generally, yes, if the policy is reasonable and connected to earning self-employed income.

Insurance can be easy to overlook because it may be paid annually, bundled with home or auto coverage, or required by a client before you can start a contract. If the coverage protects your business activities, track it for your T2125 instead of leaving it buried in personal bills.

Insurance You Can Usually Claim

Common deductible insurance costs for freelancers and sole proprietors include:

These costs usually fit line 8690 — Insurance on the T2125 when they are specifically business-related.

What You Should Not Claim at 100%

Be careful with personal insurance. Life insurance, disability insurance, personal health coverage, and ordinary home or tenant insurance are not automatically business deductions just because you are self-employed.

If a policy is mixed-use, claim only the business portion. For example, if your tenant insurance includes a small home-business endorsement, the endorsement may be deductible, but the entire tenant policy is not. If your insurer provides a separate business rider amount, keep that breakdown with your records.

Home Office and Insurance

Home-based freelancers often ask whether home insurance belongs under home office expenses or insurance. The answer depends on how you track it.

If you are claiming a proportional share of household costs for a workspace, the business-use portion of home insurance may be part of the home-office calculation. If you also pay a separate business endorsement, track that clearly so you do not double-count the same premium.

For home office costs, remember that the deduction generally cannot create or increase a business loss. Unused home office expenses may carry forward, so keep the calculation even if the current-year deduction is limited.

Vehicle Insurance Is Different

If you use a vehicle for business, the business-use portion of auto insurance is normally part of your motor vehicle expense calculation, not a separate 100% insurance deduction. Track total kilometres and business kilometres, then apply the business-use percentage to eligible vehicle costs.

Example:

A mileage log is the support for that percentage.

Records to Keep

For insurance deductions, save:

If a policy runs across two tax years, allocate the premium to the correct period if your bookkeeping method requires it.

Track Insurance Premiums with ClaimHero

ClaimHero helps Canadian sole proprietors log insurance premiums by T2125 category, add notes for business purpose, and keep year-end totals organized. Recording annual renewals, riders, and mixed-use calculations as they happen makes tax time much cleaner.