Welcome to Corporate Life Insurance.ca

Business owners who are shareholders of private corporations and have cash flow in excess of what is required to operate their business will often accumulate wealth within their company as retained earnings.

Most prefer not to take extra income or dividends from the company and pay more tax since their annual income is sufficient enough that doing so does not mean sacrificing their lifestyle.

By leaving the money in their company, there can be a significant tax deferral rather than distributing it through dividends or income then paying personal tax on it.

However, these retained profits or surplus of cash build passive investment portfolios that typically consist of investment vehicles that return a mix of interest, dividend and capital gains. The high amount of tax paid on passive investments and the loss of wealth due to loss of compounding growth can make this type of investment at times less desirable.

An alternative solution would be to invest the profits into a corporate-owned, tax-exempt permanent insurance policy. An exempt insurance policy is defined in regulations 306 and 307 of the Income Tax Act (ITA).

The ITA provides that the cash value accumulation is exempt from annual accrual taxation, provided certain conditions within the regulations are met. Significant cash values can accumulate on a tax deferred basis if the maximum deposits permitted by the ITA are deposited into the exempt policy.

The deposits can be designed so that they remain tax-sheltered within the contract.

Not only does a corporate-owned exempt policy allow for tax-deferred growth of the cash value of the policy, but there’s also a mechanism that allows the death benefit proceeds to go tax-free to shareholders through the corporations capital dividend account (CDA). The CDA credit is unique to corporate-owned life insurance. Upon death of the insured, a private corporation receives the death benefit tax-free and that amount less the adjusted cost basis (ACB) of the policy is added to the corporation’s capital dividend account. The policy’s ACB is generally the sum of the cumulative premiums paid minus the cumulative net cost of pure insurance. The CDA balance resulting from receipt of death benefit proceeds from a life insurance death benefit will remain until such time as capital dividends are elected. This allows corporations the ability to elect to pay a capital dividend when it’s most advantageous for shareholders.

Tax-advantaged growth and tax-free distribution on death results in corporate-owned permanent life insurance having two significant and unique tax advantages over traditional investments.


  • Do you have surplus cash flow in your business held in a holding company to house passive investments that is not required for day-to-day operations?
  • Do you want to reduce your corporate taxes on investment income?
  • Would you like to transfer taxable corporate investments into a tax-deferred investment vehicle?
  • Do you want to leave your corporate assets to your family tax free?
  • Do you want to minimize capital gains tax upon the deemed disposition if shares upon death?
  • Would you like those “locked-in” assets to be paid as a tax free dividend through the Capital Dividend Account?
  • Do you want to immediately increase the value of your estate?
  • Do you want a plan that can protect you and your family from creditors?

If you answered “Yes” to any of these questions then click on the 3 examples above and see how these 3 business owners were able to reduce their corporate tax bill and put that money right back into their pocket.

If you have any question or comments or would like more information, please contact us.

Any information contained in this website is intended as a general guide only and should not be considered the ultimate source for any of the information contained herein. You must undertake further research and must seek the advice of a qualified professional before taking any action related to such information. While we consider the information provided to be reliable at time of publication, we make no representations or warranties that the information contained in this website is complete, timely, or accurate. This information can become out-of-date. We make no commitment, and disclaim any duty, to update any of this information.