Corporate Life Insurance
As you may be aware life insurance can be used by individuals to cover debts, funeral expenses and provide financial security to your family after your death. As a business owner life insurance can also be purchased corporately and be used by your business for a variety of issues that may arise upon your death. Such things as paying off corporate debt and buying out shareholder’s estates.
A corporate life insurance policy names the corporation as a beneficiary allowing the corporation to pay the premiums and collect the proceeds upon the death of the insured. The premiums may not be deductible but they can be financed by corporate dollars, which is better than using after-tax personal dollars.
It’s important to ensure that any corporate owned insurance policy names the company as the beneficiary and policy owner, and names the shareholder as the covered person.
Why would you want corporate owned life insurance?
- Estate tax and equalization - Important for family-owned corporations where the major part of the value of a person’s estate is within the shares of the company. The estate may have multiple beneficiaries, some of whom are not involved in running the company. Once the estate assets are divided among the family members there may not be enough cash to pay tax on the deemed disposition of shares let alone provide equivalent value to the uninvolved beneficiaries. Paying into an estate via corporate owned life insurance can fund tax liabilities and equalize the value among beneficiaries.
- Loan protection - Lenders require that business loans be personally guaranteed by the owner and in some cases, lenders may also require life insurance for key people for the duration of the loan. It’s a good practice to have life insurance to avoid any debt owed upon your death not become a liability of your estate. Corporate life insurance also improves your business’ ability to obtain financing.
- Key person protection - Corporate life insurance can provide a business with the cash flow needed for working capital or to repay debts, or to provide the funds necessary to hire and train a replacement when a key executive dies.
- Buy-sell agreements - Corporate life insurance is frequently used by private companies to fund buy-sell transactions that are triggered by a shareholders' agreement upon death.
There are many benefits and flexible planning options when purchasing and using life insurance through your private corporation. With that can come a number of additional complexities to consider. You should always consult the appropriate advisors to ensure the planning is done correctly.
Contact one of our Benefits Specialists today and let’s get working with you! Email us at better@hubbardinsurance.com or call 905.696.9090 where you’ll be “Well Advised. Well ProtectedTM.”
Alternatively fill out the Get a Quote form and we will contact you as soon as possible.
Other Insurance Coverage to Consider
GENERAL BUSINESS INSURANCE
Protect your business property and assets as well as your reputation from lawsuits, accidents and more.
DIRECTORS & OFFICERS INSURANCE
Coverage for Directors & Officers protecting themselves and their organizations reputations from allegations of negligent acts.
EMPLOYEE ASSISTANCE PROGRAMS (EAPs)
A happy and healthy workforce is more efficient and effective – Employee Assistance Programs help!
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