Empowering your Business: Unveiling the Strategic Advantages of Whole Life Insurance for Business Owners

March 5, 2024

Whole life insurance can provide various benefits to business owners like yourself that you may not be aware of: 

  1. Tax-Advantaged Growth: The cash value of a whole life insurance policy grows tax-deferred. This means that your corporation can accumulate wealth within the policy without incurring immediate tax obligations. The policy's cash value can be invested, and any earnings within the policy are not subject to annual taxation.
  1. Tax-Advantaged Withdrawals and Loans: Policyholders can access the cash value of the whole life insurance policy through withdrawals or loans. These withdrawals are typically tax-advantaged, providing a source of funds for the corporation without triggering immediate tax liabilities.
  1. Ability to Borrow: The cash value of a whole life insurance policy can be used as collateral for loans. This can be particularly helpful for businesses that may need access to funds for various purposes, such as expansion or liquidity needs.
  1. Employee Benefits: Some corporations use whole life insurance as part of executive compensation packages or employee benefits. This can serve as a valuable retention tool and provide additional financial security for key employees.
  2. Tax-Free Death Benefit: The death benefit paid out to your corporation's beneficiaries is typically tax-free. This can be advantageous for estate planning, as it provides a tax-efficient way to pass wealth to the next generation or to fund a buy-sell agreement.
  1. Estate Planning: Whole life insurance can be a useful tool in estate planning for business owners. It can help ensure that there are funds available to cover taxes and other obligations upon the owner's death, allowing for a smooth transition of the business to the next generation or designated successors.
  1. Funding Buy-Sell Agreements: Whole life insurance is commonly used to fund buy-sell agreements in closely held corporations. In the event of a shareholder's death, the death benefit can be used to buy out the deceased shareholder's interest, ensuring a smooth transition of ownership.
  1. Creditor Protection: In many provinces in Canada, the cash value and death benefit of a life insurance policy may be protected from the claims of creditors. This can be valuable in situations where the corporation faces financial challenges.

TAAG can help optimize corporate-owned life insurance, critical illness, and disability policies, ensuring tax-efficient cash values and premium returns. We invite you to meet with one of our risk management specialists to assess and enhance your coverage to align with the evolving needs of your family and business.  Contact us today!

Colin Keddy, RFP
Director of Family Office

Published by TAAG Corporation
© 2024 TAAG Corporation
Attribution-NoDerivatives 4.0 International (CC BY-ND 4.0)

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