Most business owners understand that assets vital to the success of the enterprise should be insured. Premises are routinely covered for fire and/or theft; vehicles used to make deliveries, insured; machinery needed for manufacturing, also insured. Given that these tangible assets are instrumental in the success of the business, it makes good business sense that the business is protected in the event of a loss. But what about key employees? Many business owners overlook the impact on their business should a key employee die unexpectedly.
If you own or manage a company whose continued success is dependent on key people (it might even be you), it would be prudent to insure all key personnel whose death or incapacity would negatively affect profitability. Key persons are those who contribute to the continuing success and profitability of the enterprise.
What happens when an owner or key person dies or becomes disabled? Read more
Life insurance is used for two general purposes in a private corporation – managing risk and creating opportunities. The risk management function is satisfied as life insurance provides the corporation with a tax-free payment in the event of the death of an owner or someone vital to the success of the business. As life insurance also allows for the tax-sheltered build up of cash value additional planning opportunities are additionally created.
The primary needs for corporate owned life insurance to satisfy the risk management purpose are as follows:
Key Person Life Insurance
Any prudent business would insure its company facilities and equipment that is used in creating revenue. It follows then that the business should also insure the lives of the people that run the company and make the decisions which contribute to its profit. Any owner, manager or employee whose death would impair the future growth and success of the company is a key person and should be insured as such. Read more
The Liberal Government’s Federal Budget was delivered by Finance Minister, Bill Morneau, on February 27, 2018. There had been much concern and speculation about the direction the budget would take with respect to the taxation of private corporations. This was due to a release of the Department of Finance in July 2017 which contained private corporation tax proposals which addressed areas of concern to the government involving, among other things, business owners holding passive investments inside of their corporation. There was speculation that if these proposals were implemented the effective tax rate on investment income earned by a private corporation and distributed to its shareholders could increase astronomically. Thankfully, the concerns voiced by business and professional groups following the July proposals were effective in moderating the government’s actions.
Many business owners understand the important role that life insurance plays in effective corporate planning. Whether it is the funding of a shareholders’ agreement, life insuring corporate debt, or protecting against loss from the death of a key employee, life insurance is of great value in underpinning the financial success of a corporation.
Just as life insurance needs for families change over time the same is also true for requirements of a business. If it has been some time since you last reviewed your corporate needs then it is probably time for a corporate insurance audit. This is especially true if the company has grown in value since the time the insurance was first implemented. The scope of the audit and the insurance related issues include the following: Read more