In Canada, life insurance death benefits are generally received tax-free by beneficiaries. This means that when a policyholder passes away, the payout from the life insurance policy is not considered taxable income and does not have to be reported on the beneficiary’s income tax return. However, if the death benefit includes any interest earnings (for example, if the insurance company holds the money for some time and pays interest), the interest portion would be taxable. Similarly, if a life insurance policy is sold or transferred for value, there may be tax consequences. Business-owned policies can also have different tax treatments, especially when a corporation is involved. In general, for personal life insurance, Canadians do not need to worry about paying taxes on the basic death benefit, making it a useful tool for estate planning and financial security for surviving family members.