Is corporate-owned life insurance right for me?
Corporate-owned life insurance lets your corporation pay premiums with lower-taxed corporate dollars, fund shareholder agreements, cover the tax bill that arises at death, and move value to your estate tax-efficiently. It isn't right for every owner — the decision is modelled with your accountant before anything is put in place.
How it works in a Canadian corporation
When a Canadian corporation owns a permanent life insurance policy, premiums are paid with corporate dollars. The death benefit is received by the corporation largely tax-free, and most or all of it can be credited to the capital dividend account, allowing tax-free distribution to your estate or surviving shareholders.
Common uses include funding buy-sell agreements between shareholders, covering the deemed disposition tax that arises when an owner dies, and building tax-advantaged cash value inside the corporation as part of a retained earnings strategy.
Who it suits — and who it doesn't
A good fit if…
- Your corporation has surplus income beyond what you draw personally
- You have a shareholder agreement that needs funding
- You want to reduce the tax your estate pays on corporate assets at death
- You want the decision modelled with your accountant before committing
Probably not if…
- Your business is not incorporated
- You need the corporate cash for operations in the near term
- You're looking for accounting, bookkeeping or tax preparation services — we don't provide those
How we work with your accountant and lawyer
We do not provide accounting, tax or legal services. Your accountant and lawyer stay at the centre of every plan: we develop options, they confirm the tax and legal treatment, and nothing is implemented without their review.
If you don't have an accountant or lawyer, we can suggest questions to ask when choosing one — and with your consent, introduce you to independent licensed professionals.
FAQ
Frequently asked questions
Why would my corporation own life insurance instead of me personally?
Premiums are paid with corporate dollars taxed at lower rates than personal income, and the death benefit can flow to the corporation and out to your estate tax-efficiently through the capital dividend account. Your accountant confirms the numbers for your situation.
How does it fund a shareholder agreement?
Buy-sell agreements require cash at exactly the wrong moment — a death or disability. Corporate-owned life insurance provides that liquidity so the surviving owners can buy the shares without draining the business.
Is corporate-owned life insurance an investment?
Certain permanent policies build cash value inside the corporation on a tax-advantaged basis, which can complement a retained earnings strategy. Whether it fits depends on your age, health, corporate income and goals.
Who sells me the policy?
Policies are arranged through a licensed life insurance agent. Insurance products are offered only in provinces where we are licensed; elsewhere, with your consent, we introduce you to an independent licensed professional in your province.
Your surplus deserves a deliberate plan.
For incorporated owners with $250K+ in retained earnings, or $100K+ in annual profit left in the corporation. Tell us about your surplus and your family goals so we can confirm whether we can add value.