Translation:My family lives in Canada.
They chose to use the word reside because "live" in English can mean either to stay somewhere or to be alive.
"My family live in Canada" should be accepted. The word "family" can be singular and plural depending on the context. Reported on Nov. 18, 2017.
"Family" can be a mass noun, like the distinction between fish (plural) and fishes. My family lives and my family live can both be correct.
No, in this case "family" is a single unit and you must say "lives". "My family live in Canada" would be something only an extremely uneducated native or a non-native speaker might say.
The plural verb after "family" is very common in the UK I believe, even among well-educated people. This is presumably because the reference to the family is considered to apply to the people in it, and is so common that Duo really should accept it. In Australia you can say it either way without appearing uneducated whereas I understand in the US the singular verb is mostly used. Perhaps some people from the UK and US could comment further.
Uneducated like someone who doesn't know the difference between British English and American English conventions in referring to groups of people?