Corporate-Owned Life Insurance: Supercharge Your Business Strategy

How Corporate-Owned Life Insurance Can Supercharge Your Business Strategy

Owning an incorporated business already gives you a serious edge—limited liability, better access to capital, and lower tax rates are just the start. But there’s another strategy that many owners overlook—one that not only protects your company but can also enhance your financial planning and tax efficiency:

Corporate-Owned Life Insurance — now available through the BeniPlus Personal Insurance category.

Why Consider Corporate-Owned Life Insurance?

Unlike policies that protect against operational risks, corporate-owned life insurance is designed to safeguard your business in the event of a shareholder’s death—and it’s owned by your corporation, not you personally.

Here’s why it’s a smart move:

1. Pay with Corporate Dollars, Not Personal Dollars

Through the BeniPlus platform, you can manage your Personal Insurance — including corporate-owned life insurance — directly from your benefits dashboard.

If your company is a Canadian-controlled private corporation (CCPC) that qualifies for the small business tax deduction, your corporate tax rate could be around 11% in Ontario.

That means for every $100 earned, your company keeps $89 after tax to put toward insurance premiums.

Compare that to paying with personal income at a 50% marginal tax rate—you’d only have $50 out of every $100 left for premiums.

Bottom line: Paying with corporate dollars is far more efficient and keeps more of your personal income available for other priorities.

2. Tax-Advantaged Growth Inside the Policy

Corporate-owned life insurance policies often include a cash value component that grows tax-deferred — similar to an RRSP — within your corporation.

Through BeniPlus, this policy sits alongside your other benefit accounts (like HSAs, WSAs, RRSPs, and TFSAs), giving you a central place to track how insurance fits into your broader financial plan.

3. Flexible Collateral for Business or Personal Needs

A lesser-known benefit: you can use the policy as collateral to secure a loan. That loan could fund a business expansion, new equipment, or even personal investments or retirement plans.

With BeniPlus, managing your Personal Insurance portfolio alongside your other benefits makes it easier to see the big picture and plan your next move.

4. Strategic Protection for Your Company

Corporate-owned life insurance isn’t just about payout—it’s about planning ahead:

• Funding Buy-Sell Agreements: Smooth ownership transitions between shareholders.
  
• Key-Person Coverage: Protect against the loss of an irreplaceable team member.
  
  

5. Access to the Capital Dividend Account (CDA)

Life insurance proceeds are received tax-free by the corporation, and the net amount gets credited to your Capital Dividend Account—allowing tax-free distributions to shareholders. This can be a huge advantage in estate planning and tax optimization.

Important Considerations

While the benefits are significant, there are details to manage:

• Holding the policy in your operating company could expose it to creditor claims.
  
• Transferring the policy can be tricky if you sell the business.
  
• Many advisors recommend holding it in a holding company with the operating company as beneficiary.
  
  

If you have multiple shareholders, it’s essential to have a clear, well-drafted shareholder agreement to ensure fair valuation and funding.

How BeniPlus Makes It Easier

With the Personal Insurance category in your BeniPlus platform:

• Manage corporate-owned life insurance alongside your other benefits and investments.
  
• Centralize policy details, premium tracking, and beneficiary information.
  
• Keep your business protection strategy aligned with your broader employee benefits plan.
  
  

Final Word‍

Corporate-owned life insurance — especially when integrated into your BeniPlus Personal Insurance benefits—can be a powerful tool to protect your business, enhance your tax efficiency, and support long-term wealth strategies.

It’s more than just insurance—it’s a smart way to align your business protection with your overall financial plan.