Corporate Life Insurance

Can My Corporation Pay My Life Insurance Premiums?

Yes — but how it's structured matters a lot for the tax outcome. There's a real difference between your corporation owning the policy outright and your corporation simply covering the premiums on a policy that's personally yours.

Two Different Situations, Two Different Answers

"Can my corporation pay my premiums" usually means one of two things, and they're taxed very differently:

• The corporation owns the policy. This is standard corporate-owned life insurance — the corporation is the owner, payor, and beneficiary. Premiums come from corporate dollars, and the corporation eventually receives the death benefit. This is the structure covered throughout this site's Business & Estate Planning section.
• You own the policy personally, and the corporation pays the premiums for you. This is different — and it usually creates a taxable shareholder benefit. If your corporation pays premiums on a policy that you personally own, the CRA generally treats that payment as a taxable benefit to you, added to your personal income for the year, roughly equivalent to the corporation simply paying you a bonus or dividend and you using it to pay the premium yourself.

Why the Second Structure Usually Doesn't Save Anything

Because the premium payment is treated as a taxable benefit to you personally, you end up paying personal tax on the amount either way — whether the corporation pays the premium directly and it's added to your income, or you take the money out as salary/dividends first and pay the premium yourself. The apparent "corporation is paying" convenience doesn't actually avoid personal taxation on that value. This is a common point of confusion, and it's worth getting right before setting up the arrangement.

Are Life Insurance Premiums Tax-Deductible for the Corporation?

Generally, no — life insurance premiums are not a deductible business expense for the corporation, whether the corporation owns the policy or is paying premiums on your behalf. There's a narrow exception: if a policy is collaterally assigned to a lender as security for a business loan, a portion of the premiums may be deductible in specific circumstances. This is a technical area your accountant should confirm — don't assume deductibility without checking.

So What's the Actual Benefit of Corporate Ownership, If Premiums Aren't Deductible?

The advantage isn't a tax deduction on the premium — it's that the premium is paid with corporate dollars taxed at the (generally lower) small business rate, rather than personal dollars you'd have to withdraw and pay personal tax on first. Over time, the policy's cash value also grows without annual taxation, and the eventual death benefit can reach shareholders largely tax-free through the Capital Dividend Account. The full mechanics are covered on the Corporate-Owned Life Insurance page.

Frequently Asked Questions