Group Term Life Insurance Policy

Group insurance contracts included various life insurance benefits as well as a critical illness benefit, which was payable in the event that the insured suffered from one of the covered diseases or medical conditions and was payable in a lump sum. After indicating that the treatment of the premiums and benefits regarding the critical illness coverage turned on whether the contract should be characterized as a contract of sickness or accident insurance and that “a contract that provides exclusively for a benefit in the event of critical illness is a contract of sickness or accident insurance” whereas “a contract that contains a critical illness insurance clause that is incidental to a life insurance contract will be a life insurance contract,” CCRA stated:

Subsection 248(1) defines the term "group term life insurance policy" as a group life insurance policy under which only certain amounts are payable, namely, amounts payable in the event of the employee's death or disability and policy dividends or experience rating refunds. In our view, a group life insurance policy that provides critical illness coverage is not a "group term life insurance policy" within the meaning of subsection 248(1). Consequently, the premiums paid by the employer in respect of such a life insurance policy would be a taxable benefit included in the employee's income pursuant to paragraph 6(1)(a).

Re arrangement where the employer includes coverage for dependents of the employee but documentation provided to the employee states that such additional coverage is optional.