Corporate-owned life insurance
Permanent coverage paid by the company. It protects the business while you are alive and moves value to your family through the capital dividend account at death.
Service 04 ยท Business owners
Insurance strategies for incorporated business owners.
Your corporation holds money you would pay personal tax to take out. Some of it can fund insurance that protects the business and moves value to your family with far less tax. I build these plans with your accountant and lawyer.
Why your corporation should own some of your insurance
Money earned inside your corporation is taxed at the corporate rate, which is lower than your personal rate on active business income. Taking it out as salary or dividends costs personal tax. A policy owned and paid for by the corporation uses those lower-taxed dollars.
When the insured person dies, the corporation receives the death benefit tax-free. Most of that amount, the death benefit minus the policy's adjusted cost basis, is added to the corporation's capital dividend account. The corporation can then pay that amount to your family or estate as a tax-free capital dividend.
In plain terms: money that would have been taxed twice on its way to your family can arrive with far less tax. Premiums are generally not deductible, and every structure depends on how your corporation is set up.
The tax bill at death
When you die, the tax rules treat you as if you sold everything you own, including the shares of your company. The capital gain is taxed on your final return. Without a plan for that bill, your family may have to sell assets or the business itself to pay it. Insurance can fund the bill so the business stays in the family.
Four strategies I build for owners
Each one starts with your corporate structure and your shareholder agreement.
Key person coverage
Pays the company if a person it depends on dies or falls ill. The money covers lost revenue, a replacement hire, or reassures lenders while the business recovers.
Buy-sell funding
If a partner dies, the survivors need cash to buy the shares from the family. Insurance funds the purchase your shareholder agreement promises, so nobody is forced to sell or borrow.
Estate and succession planning
Coverage sized to the tax bill on your shares at death, often paired with an estate freeze your accountant sets up. Your heirs inherit the business, not a tax problem.
How we work together
1. Map the structure
Operating company, holding company, shareholders, and what your agreement says should happen if an owner dies or falls ill.
2. Bring in your accountant
I share the plan with your accountant before anything is signed. They confirm the tax treatment for your corporation.
3. Compare and design
I compare insurers and policy designs, then show you the cost, the ownership and the beneficiaries in writing.
4. Review as you grow
Valuations rise and partners change. We review coverage each year so it keeps up with the business.
I am a licensed insurance agent, not an accountant or a lawyer. Tax rules change and every corporation is different. Your accountant and lawyer confirm the tax and legal treatment before any policy is placed.
Common questions
Do I need a holding company for this?
No. An operating company can own a policy. Many owners use a holding company to keep the policy away from the risks of the operating business. Your accountant and lawyer decide which structure fits.
My partner and I have a shareholder agreement. Is that enough?
An agreement says who buys whose shares. It does not provide the money. If the purchase depends on cash the company does not have, the agreement can fail when it matters. We check whether the funding matches the promise and the current value of the shares.
Can the corporation pay for my critical illness insurance?
Yes. Corporate-owned critical illness coverage can fund a business through an owner's illness, and some designs return premiums later. The tax treatment differs from a personal policy, so your accountant reviews the design first.
How is this different from my personal insurance?
Personal coverage protects your family's household: the mortgage, income and children. Corporate coverage protects the business and handles the tax on your shares. Most owners need both, sized for different jobs.
I already have an advisor. Can you still help?
Yes. I can review what you have and give you a second opinion in writing. If your current plan is sound, I will tell you.
Your corporation may already hold the money to protect your family.
In 15 minutes we look at how your company is set up, what your agreement promises, and whether the funding is in place.
Book a 15-minute review
Or call or text (647) 627-2480