Regarding the taxation of individual disability insurance benefits in Canada, what is generally true if the premiums were paid by the insured?

Question: Regarding the taxation of individual disability insurance benefits in Canada, what is generally true if the premiums were paid by the insured?

Answer options:

• The premiums are tax-deductible, and the benefits are taxable. ✅ The premiums are not tax-deductible, and the benefits are tax-free.
• The premiums are tax-deductible only if an employer pays them.
• The benefits are taxable if they exceed a certain annual threshold.

Correct answer: The premiums are not tax-deductible, and the benefits are tax-free.

Explanation: When the individual insured pays their own disability insurance premiums, those premiums are not tax-deductible, and consequently, any benefits received from the policy are tax-free. This encourages individuals to secure their own income.