Corporate owned life insurance (COLI) policies have been used for over 100 years in North America.
Though at times complex, the type of coverage protection this life insurance policy offers may be a critical component in addressing all of your business insurance needs.
At Benefit Strategies, our Alberta insurance advisors have over 30 years of experience in helping business owners accurately assess their need for corporate owned life insurance. We also have the expertise to fully explain the complicated tax implications and beneficiary options that go along with any corporate life insurance plan in Canada.
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This page is designed as a very general overview of Canadian corporate owned life insurance. We highly recommend scheduling a consultation with our Business Advisors so we can explain COLI in the context of your specific business needs.
What is Corporate Owned Life Insurance?
A corporate owned life insurance policy is a life insurance policy for an employee or executive that is purchased and owned by the employer or corporation. The corporate owned life insurance benefits are payable to either the employer, or directly to the family of the insured employee.
How Does Corporate Owned Life Insurance Work?
Today, Canadian corporate life insurance policies are most commonly purchased for senior executives of a company but they can also be purchased for general employees. There are various corporate life insurance strategies used, depending on the company situation. Some of the most common uses of corporate owned life insurance include:
- Reimburse the cost of funding employee benefits
- Providing key person life insurance
- Funding the buyout of a deceased partner or owner of the business
- Creating tax deductions
- Providing business loan protection
- Funding capital gains on a business at death
Corporate Owned Life Insurance Tax Considerations
It is crucial that before purchasing a corporate owned life insurance policy that you fully understand the tax implications, as they are highly complex. These Canadian COLI tax implications can include but are not limited to:
- Tax issues associated with various beneficiary designations
- Transfers in the corporate context
- Small business deductions
- Federal and provincial capital taxes that apply
- Life capital gains exemption
- Corporate attribution rules
Generally speaking, the corporate owned life insurance beneficiary is usually the corporate owner. However it is highly suggested to seek the advice of a qualified tax advisor before determining to whom to attribute policy ownership and compensation.
Ask Us About COLI Insurance Policies In Canada
Daryl Smith (CFP, CLU, ChFC, TEP) is a highly skilled Corporate Estate planner and works with clients throughout Edmonton, Calgary, Lethbridge, Red Deer, and the rest of Alberta and Western Canada. At Benefit Strategies Inc., Daryl’s primary goal is the protection and preservation of both personal and corporate assets.