Keep operations running
Key-person cover may help replace lost revenue, recruit leadership, retain staff, manage debt and preserve working capital after an eligible claim.
Explore key-person insuranceCorporate Insurance · Ottawa
Protect the people and ownership behind your business.
Corporate insurance may use life, disability or critical illness cover to fund obligations when an owner or key person dies, becomes disabled or experiences a covered illness.
Start with the obligation
Choose the business need before the policy.
Fund an ownership transition
Buy-sell and disability-buyout coverage may fund an eligible purchase of an owner’s interest. Shareholder protection must match the agreement and its purchase obligations.
Explore buy-sell fundingProtect borrowing and guarantees
Review business loans, personal guarantees, policy ownership, the beneficiary and any collateral assignment. The coverage amount should reflect the obligation.
Provide longer-term liquidity
A corporation may own life insurance for a legitimate business need, including debt repayment, share purchases, estate liquidity and succession.
Explore corporate-owned life insuranceThe corporation that owns the policy, the person insured and the beneficiary may not always be the same party. The structure should reflect the intended business, legal and tax outcome.
Coordinate the structure
A policy needs an agreement and a funding plan.
A shareholder agreement sets obligations; insurance must be separately applied for, approved and maintained. Align the valuation method, purchase obligations, corporate structure, policy owner and beneficiary with your lawyer and accountant.
Estimate the cost of key-person loss, debts and share purchases against available reserves. Otherwise, surviving owners or an estate may face borrowing, asset sales or delayed payment.
Ownership and tax considerations
- Who should own the policy
- Who should be insured
- Who should receive the benefit
- How premiums will be funded
- Whether premiums are deductible
- The policy’s adjusted cost basis
- The corporation’s capital dividend account
- Shareholder relationships
- Creditor exposure
- The effect of a future sale or reorganization
- The consequences of transferring an existing policy
- Ongoing documentation and review
Under applicable Canadian tax rules, a portion of qualifying life-insurance proceeds may contribute to a private corporation’s capital dividend account.
The amount is not necessarily equal to the full death benefit. Proper calculations, corporate resolutions, tax elections and professional advice are required before any distribution.
Life insurance should not be described as a guaranteed method of withdrawing corporate funds tax-free. Outcomes depend on current law, policy values, corporate circumstances and proper implementation.
Operations need their own protection.
Business insurance addresses customer injury, professional errors, cyber incidents, theft, commercial vehicles and interruption after insured property damage. Commercial property protects eligible buildings, equipment, inventory and tenant improvements.
Explore business insurancePeople and ownership protection does not replace these operational coverages.
Questions before you decide
Look closely at the details.
Does a shareholder agreement automatically include insurance?
No. The agreement may describe the obligation, but the insurance must be separately applied for, approved, owned and maintained.
Are corporate life-insurance premiums tax-deductible?
Generally, life-insurance premiums are not automatically deductible. Limited exceptions may apply in specific circumstances, such as certain collateral assignments. Obtain advice from a qualified tax professional.
Does the full death benefit enter the capital dividend account?
Not necessarily. Canadian tax rules generally consider qualifying net proceeds after applicable adjustments. A qualified tax professional must calculate the available balance.
Can corporate insurance replace succession planning?
No. Insurance may provide funding, but succession also requires legal agreements, leadership planning, valuation and operational preparation. See our Business Succession Planning page for a fuller overview.
Review with Centerpointe
Bring your ownership structure and existing agreements.
We’ll review the people, debt and transition obligations involved, estimate the funding gap and compare eligible policies with your professional advisors. Review the plan when ownership, valuation, debt, key staff, corporate structure or family circumstances change.
Corporate Insurance Areas We Serve
Corporate Insurance guidance in Ottawa and neighbouring Eastern Ontario communities.
Corporate insurance strategies and insurance products are subject to application, underwriting, eligibility, policy terms and insurer approval.
Policy ownership, beneficiary arrangements, adjusted cost basis, capital dividend account treatment, premium deductibility and corporate distributions involve complex legal, accounting and tax considerations.
Tax rules and interpretations may change. No particular tax outcome, deduction, capital-dividend amount or distribution is guaranteed.
Centerpointe Financials does not provide legal, accounting or tax advice. Clients should obtain independent advice from appropriately qualified professionals before implementing a corporate insurance strategy.