Government sources tell The Canadian Press that the changes will increase coverage for reservists, as initially recommended by the military ombudsman almost four years ago.
The improvements take effect almost immediately and a formal announcement is expected later.
Sources say there are only a handful of cases — possibly less than 10 — every year and the cost to taxpayers is measured in the hundreds of thousands of dollars.
The insurance coverage under review applies to soldiers serving in Canada, and not to reservists who take up duty overseas in places like Afghanistan. They are covered under a separate, more comprehensive system.
Two weeks ago, Defence Minister Peter MacKay promised swift action in the aftermath of ombudsman Pierre Daigle's latest report, which slammed the government for failing to address the issue.
His report noted that the insurance plan that compensates soldiers for losing limbs has not been amended — a fact the ombudsman called "unfair and inequitable."
Under that plan, a reserve member received only 40 per cent of what full-time soldier gets for the same dismemberment.
"This office remains steadfast in the position that the dollar value of a leg, an arm or an eye should not be different for Canadian Forces members depending on their class of service," Daigle wrote on Nov. 21.
During the course of his investigation, Daigle discovered that National Defence had tried in 2009 to implement the changes, but was blocked by Treasury Board officials.
He asked to see documents about the dispute, but was told they had been deemed secret cabinet confidences, an explanation that mystified both Daigle and his investigators.
The issue of cabinet secrecy has been invoked on several other files, the ombudsman said.
In response, Daigle ordered an examination of his mandate, but a constitutional expert says the ombudsman's powers are not the issue.
Errol Mendes, a University of Ottawa law professor who advised Paul Martin's government, says the Conservatives and the bureaucracy have stretched the definition of cabinet secrecy to include anything that may embarrass the government.
Mendes says declaring confidence on a issue such as insurance coverage — one that will cost the government a pittance — is astonishing because the matter had likely not been anywhere near the cabinet table.
He says cabinet confidence declarations were never to meant as a tool to hide information from watchdogs and the public.