Why/When to own Corporate Owned Permanent Insurance

When should you consider Participating Whole Life Insurance inside your Corporation?

  • You’re a significant shareholder in a Canadian Controlled Private Corporation
  • Age 40+ and healthy
  • The corporation has excess annual cash flow and/or investment assets not needed for business purposes. Typically, been in business for at least 5 years.
  • Want to maximize your estate and transfer assets in a tax-efficient manner
  • Looking for stable and predictable asset growth (asset diversification)

Suitability Reasons

The more checkmarks the greater the need for this strategy.

✔️  Business Succession plan in place?  
✔️  Reduce tax on corporate investment income?   
✔️  Desire to pass corporate assets to a beneficiary?  
✔️  Have a corporate life insurance need?  
✔️  Own taxable passive investment assets?  
✔️  Own corporate investments with a deferred capital gain?  
✔️  Want a certain amount of estate value guaranteed?

Comparing a traditional investment to participating whole life insurance while living and at death
Traditional Investment 
While Living:
  • Taxes payable on investment income: Interest, dividends, realized capital gains
  • Passive investment income: Pay the highest corporate tax rate, no small business deduction
At Death:
  • Taxes payable on deferred capital gains
  • Taxes payable on the transfer to shareholders estate
Participating Whole Life Insurance
(Alternative asset class)
While Living:
  • Policy earnings grow tax-exempt up to government prescribed limits
At Death:
  • All policy proceeds are paid tax-free to the corporation (no deferred gains)
  • Death benefit minus adjusted cost base paid out tax-free to shareholders estate through a notional Capital Dividend Account 

Life insurance is Wealth Protection

Total Wealth = human capital + financial capital