Corporate Owned Critical Illness Insurance

Corporate Use Cases

Three ways this protects the business, not just the person

Structured around corporate risk, not individual coverage.

Key Person Revenue Protection

A lump sum paid to the corporation to replace lost revenue, fund temporary leadership, and cover fixed overhead if a vital executive falls seriously ill.

Not taxable income to the corp
Bridges revenue during recovery
No CDA credit: see FAQ below

Buy-Sell & Buy-Out Funding

Liquid capital to fund a shareholders' agreement obligation to buy out a critically ill shareholder's equity, without draining working capital or taking on debt.

Funds the buyout, doesn't replace it
Requires an existing shareholders' agreement
Avoids forced asset sales

Executive Retention & Shared Ownership

The corporation pays for the CI benefit; the executive personally pays for a Return of Premium on Death/Cancellation (ROPD) rider, under a formal cost-sharing agreement.

Retention incentive for key executives
Requires a written cost-sharing agreement
Drafted with your corporate lawyer

Shared Ownership Structure

Who pays for what, and why it's split this way

Each party pays for the portion that benefits them, documented in writing, not assumed.

The Business's Role

The corporation owns and pays for the critical illness benefit portion of the policy: the part that protects business earnings, covers debts, and funds key-person replacement costs if the insured executive is diagnosed.

Pays premiums for the CI benefit only
Receives the lump sum on a valid claim
Deducts its share as a business expense

The Executive's Role

The executive personally owns and pays for the Return of Premium (ROP) rider portion, so if no claim is ever made, the refunded premiums belong to them personally, not the corporation.

Pays premiums for the ROP rider only
Receives the refund personally if unclaimed
Split must be documented in a written agreement

This split only holds up with a formal, written cost-sharing agreement between the corporation and the executive. Without it, CRA can treat the corporate-paid portion as a taxable shareholder or employee benefit, this is a document your corporate lawyer drafts, not something the insurance application handles on its own.

How We Work

Structured properly, from valuation to paperwork

Four steps, with your accountant and lawyer looped in where it matters.

Key Executive Impact Analysis

We quantify what a key executive's absence would actually cost the business.

Carrier Audit & Rate Benchmarking

We compare Sun Life, Manulife, Canada Life, and RBC on definitions and pricing, not price alone.

Legal & Tax Structuring

We coordinate directly with your corporate accountant and lawyer on ownership and cost-sharing.

Delivery & Ongoing Risk Review

We revisit coverage as valuations, ownership, and key personnel change.

FAQ

Common questions from business owners

How does this protect a business when a key person falls ill?

The corporation is the beneficiary, so the lump sum lands directly on the business's balance sheet, available to cover lost revenue, recruit or train a temporary replacement, and keep fixed overhead paid while the key person recovers, without the business having to borrow or liquidate assets under pressure.

Are critical illness payouts tax-free to the corporation?

The benefit itself is generally not taxable income to the corporation when received. But unlike corporate-owned life insurance, a CI payout does not create Capital Dividend Account (CDA) credit, so there's no automatic tax-free way to move those proceeds out to a shareholder afterward. Getting value out efficiently is exactly why structures like Shared Ownership CI and the ROPD rider exist, and why we bring your corporate accountant into the structuring conversation before a policy is finalized, not after.

How does a Shared Ownership Critical Illness structure work?

The corporation owns and pays for the base CI benefit, protecting the business. The executive personally owns and pays for the Return of Premium rider, so if no claim is ever made, that refund belongs to them, not the company. This only works cleanly with a formal, written cost-sharing agreement splitting the premium and ownership between the two parties. Without that document, CRA can treat the corporate-paid portion as a taxable benefit to the executive as a shareholder or employee, which defeats the purpose of the structure.

What medical conditions trigger a corporate CI payout?

Cancer, heart attack, and stroke trigger the vast majority of claims and are covered by essentially every policy. Comprehensive corporate CI policies extend to 25+ conditions. Most policies also require the insured to survive a minimum period (commonly around 30 days) after diagnosis, the exact definitions and survival period vary by carrier, which is part of what we benchmark in Step 2.

Does this replace the need for a shareholders' agreement?

No, the insurance funds a buy-sell obligation, it doesn't create one. You need an existing (or newly drafted) shareholders' agreement that actually specifies what happens if a shareholder becomes critically ill, including valuation method and buyout terms. The policy is the financing mechanism for that agreement, not a substitute for having one drafted by a lawyer.

One health event shouldn't threaten the whole business.