Corporate Paid Disability Insurance

Corporate Use Cases

Three ways to protect income and overhead

Structured around what group coverage typically leaves exposed.

Executive Individual Disability

High-limit, non-cancellable individual coverage funded by the corporation to bypass standard group plan caps.

Tops up capped group LTD
Portable if executive leaves
Tax treatment depends on who pays

Business Overhead Expense (BOE)

A tax-deductible corporate policy that reimburses actual fixed expenses, such as rent, salaries, utilities, and equipment leases, if the owner is disabled.

Reimburses actual expenses, not income
Typically 1–2 year benefit periods
Premiums deductible as a business expense

Key Person & Buy-Out Disability

Corporate-owned coverage funding key executive replacement costs, or liquid capital to fund a shareholder buy-out on long-term disability.

Funds a buyout, doesn't replace one
Pairs with shareholders' agreement
Covers recruiting & training costs

Tax Structuring

The tax treatment is a choice you make upfront

Whoever actually pays the premium, with after-tax dollars or not, determines whether a future benefit is taxed.

Taxable Benefit: Corporate Deducted

The business pays the premium directly and deducts it as a business expense. The tradeoff: any disability benefit the executive receives during a claim is taxable income to them at that time.

Lowest current-year cost to the corporation
Simple to administer: no loan or bonus tracking
Benefit received is taxable to the executive

Tax-Free Benefit: Executive Funded

The corporation pays the executive additional taxable compensation (salary or bonus), and the executive personally pays the premium from those after-tax dollars. Because the premium was genuinely paid by the individual, any benefit received during a claim is 100% tax-free.

Bonus is taxed as income first, not an untaxed pass-through
Higher current-year cost, tax-free benefit later
Shareholder loans are an alternative, with income-inclusion risk

Some advisors propose a shareholder loan to fund premiums instead of a bonus. That can work, but loans to shareholders carry their own income-inclusion risk under the Income Tax Act if not properly documented and repaid, this is a decision to make with your accountant, not a default we assume for you.

How We Work

A structure decided on purpose, not by default

Four steps, with your CPA looped in before anything is finalized.

Cash Flow & Salary Analysis

We look at how the executive is actually compensated to see which tax structure fits.

Policy & Definition Audit

We review own-occupation definitions and confirm exactly what qualifies as a BOE expense.

Tax Coordination With Your CPA

We bring your accountant into the structuring decision, before the policy is issued, not after.

Delivery & Ongoing Risk Review

We revisit coverage as compensation, ownership, and business overhead evolve.

FAQ

Common questions from business owners

Are corporate-paid disability premiums tax-deductible for the business?

Generally, yes, if the corporation pays the premium directly, it's typically a deductible business expense, and this isn't treated as an immediate taxable benefit to the executive when paid. The tradeoff is on the back end: if a claim happens, the disability benefit the executive receives is taxable income to them at that time. That tradeoff, deduct now versus tax-free later, is the actual decision we walk through in Step 1.

How does BOE insurance differ from individual disability insurance?

Individual disability insurance replaces a portion of your personal income. BOE insurance reimburses actual, ongoing business expenses, such as rent, staff salaries, utilities, and equipment leases, so the business itself keeps running while you're unable to work. Most owners carry both: BOE to keep the business solvent, individual disability to replace what you personally take home.

Why do group benefits often fail to protect business owners and executives?

Two reasons come up constantly. First, group LTD plans usually cap the monthly benefit at a flat dollar maximum regardless of actual income, which underinsures higher earners badly. Second, many group plans define "insurable earnings" as T4 salary only: if you pay yourself primarily through dividends, as many incorporated owners do, that income may not count toward your coverage at all, or may exclude you from the plan entirely.

What happens to BOE benefits if the owner returns part-time?

Many BOE policies include a partial or residual benefit provision that prorates reimbursement if the business isn't yet generating enough revenue to cover overhead on its own. This isn't universal across every policy, though. It's one of the specific provisions we check for in the definition audit in Step 2, rather than something to assume is automatically included.

Can we set up different tax structures for different executives?

Yes, the corporate-deductible and personally-paid structures aren't an all-or-nothing choice across the company. Different executives can be structured differently based on their compensation mix and personal preference for current-year cost versus a tax-free benefit later, as long as each individual's arrangement is documented and applied consistently.

Your earning power built the business. Protect it like it matters.