Insurance

Corporate owners have the unique option to fund life insurance policies through their corporation. When life insurance is owned inside a corporation, the corporation pays the premiums and is the beneficiary of the plan. Owning insurance inside a corporation offers several tax advantages. 

Premiums paid by a corporation will be lower than premiums paid by an individual, so long as their personal tax rate is higher than their corporate tax rate. Also, compared to a corporate investment account, the cash value of a permanent life insurance plan offers tax deferred growth. Upon death of the insured individual, the cost basis of the policy can be paid as a tax-free capital dividend. In this way, a tax-free benefit can be paid to a beneficiary, similarly to a personal insurance policy.

Starting January 1st 2019, investment income in a Canadian-controlled private corporations will reduce their small business deduction (SBD). At $150,000 of passive income, the SBD will be completely eliminated for corporations. Investment Income from a life insurance policy, however, will not contribute to this reduction of the SBD.