Group Insurance
Group insurance is a type of coverage that provides benefits to a defined group of people, typically employees of a company or members of an organization, under a single master policy. Instead of each person purchasing an individual policy, the group is insured collectively, which allows members to access broader coverage at lower rates. The employer or organization acts as the contract holder, while individual participants receive a certificate of insurance outlining their specific benefits.
How It Works
Group insurance covers the lives or health of a number of plan members under a contract between an insurer and a group policyholder, the legal entity that enters into that contract on behalf of the group's plan members. In Canada, this is typically set up between an insurer and an employer, with the employer acting as the plan sponsor who selects the insurer and negotiates the terms on behalf of the entire workforce. Group life and group health coverage is purchased on a voluntary basis to help provide plan members and their eligible dependents with protection for both planned and unexpected life events, and it can include accidental death and dismemberment, disability, and dental or drug coverage. Because the arrangement pools risk across many members, it can lower premiums compared to individual coverage and is designed to fill gaps left by provincial health plans, such as prescription drugs, paramedical treatments, dental and vision care. Premiums are usually shared between the employer and the employee, and claims are submitted for reimbursement of eligible health expenses.
Example:
If your Canadian employer offers a group benefits plan that includes extended health, dental, and life insurance, you and your eligible dependents are automatically covered once you meet the plan's eligibility requirements, such as completing a waiting period. You receive a certificate of insurance outlining your specific benefits, while the employer holds the master contract. Coverage generally ends when your employment terminates, though you may have the option to convert to an individual policy within a set time frame.
What to Watch For:
How an arrangement is classified matters for tax treatment. The CRA's administrative policy treats a group insurance plan as an arrangement that must cover at least two employees and provide similar benefits and cost-sharing across the covered group. If benefits or employer contributions vary significantly among employees, the CRA may treat the arrangement as a series of individual policies rather than a group plan. Under the Income Tax Act, employer-paid premiums to a group sickness and accident plan are generally not a taxable benefit to employees by virtue of subparagraph 6(1)(a)(i).
