Corporate life insurance policies have become increasingly popular among Canadian businesses. In fact, it has become a common practice for businesses to include life insurance as part of their employee benefits packages. But what about purchasing life insurance for the corporation itself? Is it a wise decision? In this article, we’ll explore the benefits and considerations of buying a corporate life insurance policy in Canada, and why it may be a smart financial move for your business.

What is Corporate Life Insurance?

Corporate life insurance, also known as business-owned life insurance, is a type of life insurance policy that is owned and paid for by a corporation. The corporation is the beneficiary of the policy and receives the death benefit if an insured employee or owner passes away.

Benefits of Corporate Life Insurance

1. Protecting the business from financial loss: If an important member of the company, such as a key employee or owner, passes away, it can have a significant financial impact on the business. Corporate life insurance can provide a death benefit that can be used to cover expenses related to the loss of the key person, such as recruitment costs, loss of income and outstanding debts.

2. Providing tax benefits: In Canada, corporate life insurance policies offer several tax advantages. The premiums paid by the corporation are considered a business expense and are tax-deductible. Additionally, the death benefit paid out to the corporation is tax-free, which can provide financial relief during a difficult time.

3. Attracting and retaining key employees: Offering a corporate life insurance policy as part of an employee benefits package can help attract and retain top talent. It shows that the company values its employees and is invested in their well-being.

Considerations for Buying Corporate Life Insurance

1. Eligibility requirements: Not all employees may be eligible for coverage and some may have to undergo a medical exam to qualify for the policy. Additionally, the corporation may need to provide financial statements and other documentation to demonstrate its financial stability.

2. Cost: The cost of a corporate life insurance policy can vary depending on several factors, such as the age and health of the insured, the amount of coverage, and the type of policy. It’s important to consider whether the premiums are affordable for the business and if the cost justifies the benefits.

3. Legal and tax implications: There may be legal and tax implications associated with purchasing a corporate life insurance policy. It’s important to consult with a qualified financial advisor or lawyer before making any decisions.

In Conclusion

Buying a corporate life insurance policy in Canada can be a smart financial move for businesses that want to protect themselves from financial loss, attract and retain top talent and take advantage of tax benefits. However, it’s important to consider the eligibility requirements, cost, legal and tax implications before making a decision. Consulting with a qualified financial advisor or lawyer can help ensure that you make an informed decision that is right for your business. At Gilko Capital, we can provide expert advice and guidance on corporate life insurance and other financial planning matters.