Corporate Insurance

Protecting you and your business

Life insurance is widely recognized for covering debts, funeral expenses, and providing financial support for families after death.

Additionally, it can be used to address income tax liabilities resulting from the disposition of private company shares. However, life insurance can also be leveraged by your corporation for various purposes following your passing.

For instance, a Canadian Controlled Private Corporation (CCPC) can hold a life insurance policy if it is the sole beneficiary. This approach allows the corporation to use pre-tax corporate funds to finance the policy, which is more efficient than using after-tax personal funds. Although premiums are not deductible, the insurance proceeds received by the corporation are tax-exempt. The proceeds are added to the company’s capital dividend account (CDA), potentially enabling a tax-free capital dividend payout to shareholders. This strategy can help address corporate debt, bolster operating capital, or facilitate the buyout of shareholders’ estates.

Top 5 Corporate Insurance Strategies for Businesses

1

Estate Tax and Equalization

Business owners often accumulate wealth within their companies, whether in an operating company (OPCO) or holding company (HOLDCO), and may face significant tax bills upon passing. While they focus on growing assets and deferring taxes, it's crucial to plan for these future tax liabilities. Corporate insurance can provide a solution for covering these taxes, preserving the estate for heirs rather than requiring them to liquidate assets. We collaborate with clients’ tax advisors to develop effective strategies for managing this potential challenge.

2

Key Person Protection

The death of a shareholder or key person can significantly impact a company's financial stability, disrupting operations and potentially jeopardizing its survival. Implementing a life insurance plan can provide crucial cash flow to maintain working capital, repay debts, and cover costs associated with hiring and training a replacement.

3

Buy-Sell Agreements

In private corporations with multiple shareholders, the death of a partner can create complications. Most clients prefer to buy out the deceased’s shares rather than deal with their family. However, many businesses lack the liquid funds for such payouts. Life insurance can facilitate these buy-sell transactions by providing the necessary funds to purchase shares from the deceased’s estate, allowing the business to continue smoothly. Proceeds can be used to redeem shares or pay a capital dividend for a personal share purchase.

4

Loan Protection

When starting a small business, owners often secure loans with personal guarantees, and lenders may require life insurance on key individuals. Even if not required, we recommend life insurance to protect the estate from inheriting business debts. This coverage can prevent a family from having to sell their home to settle business debts upon the owner’s death and can also enhance the business’s financing prospects.

5

Insurance Leveraging

Permanent insurance, such as whole life or universal life insurance, provides lifelong coverage and includes a savings component that grows on a tax-deferred basis. It can be leveraged for financial planning purposes. Additionally, an Immediate Financing Arrangement (IFA) allows policyholders collateralize the policy, in order to receive a loan against the cash-values. The proceeds of the loan can be used to fund investment opportunities.

Protecting you and your business

Contact us to get started

Vantage Financial Group is a full-service firm focused on wealth management, preservation, and succession. Our comprehensive process is principled in identifying, developing, revising, and executing personal and corporate planning solutions. Our team is comprised of professionals from different disciplines, borne of our tenet that one advisor cannot effectively specialize in all areas of financial planning.

Contact Info

info@vantagefg.com

Office Address

# 300-8063 199 St, Langley TWP, BC V2Y 0E2
Suite 1810, 1075 W Georgia St. Vancouver, BC V6E 3C9