Canada · Retained profits
Corporate-owned life insurance: where it fits
Understand the insurance need, premium commitment and cash-value trade-offs before allocating corporate surplus.
By Preserve Wealth Group · Sources checked September 22, 2026
What it is
A corporation can own a life insurance policy and pay its premiums. Permanent coverage can include cash value as well as a death benefit. Participating policies may receive dividends, but projected dividends are not guaranteed. The contract determines the guarantees and obligations.
Why an owner might consider it
An owner may have a long-term insurance need, such as funding obligations at death, alongside capital that the business does not need in the near term. Start by establishing that need and the affordable commitment. Compare the proposal with the existing plan using the same time horizon and cash-flow assumptions.
What “corporate TFSA” does not mean
Some guests use this phrase as an analogy. It is not the name of a registered corporate savings account. An insurance contract has underwriting, premiums and access conditions. Ask how its actual terms differ from a savings or investment account before relying on the comparison.
When to pause
If the business may need all of its cash soon, or cannot sustain the proposed premiums, revisit the funding assumptions. Ask for guaranteed and projected values separately, the cost of stopping early, and an explanation of the advisor’s compensation.
Questions to bring to your specialist
- What insurance need is this intended to address?
- What happens if I stop paying premiums?
- How much cash stays available outside the policy?
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Sources and scope
Educational information for Canadian business owners. Tax treatment and suitability depend on your circumstances. Review a proposed strategy with appropriately licensed financial, tax and legal professionals.