Corporate Life Insurance

Should My Corporation Own My Life Insurance in Canada?

There's no universal answer — it depends on where your premium dollars would come from, what the coverage is actually meant to fund, and how much retained earnings your corporation is holding. Here's how to think through the decision.

The Short Version

Corporate ownership tends to make sense when your corporation has retained earnings beyond what the business needs, and the coverage is meant to fund something corporate — a shareholder buyout, an estate liquidity need tied to the business, or a plan to move corporate wealth to your estate tax-efficiently. Personal ownership tends to make more sense when the coverage is purely for personal needs — replacing your income for your family, or paying off a personal mortgage — and your corporation doesn't have meaningful surplus to redirect.

The Factors That Actually Decide It

Why the Tax Rate Gap Matters

Corporate dollars taxed at the small business rate go further than personal dollars taxed at your marginal rate — which is the starting logic for corporate ownership. But that gap only matters if you'd otherwise be paying premiums with personal income you'd have to earn and pay personal tax on first. If your corporation has no real surplus and paying corporate premiums would mean taking out extra salary or dividends to cover it, the corporate-ownership advantage can disappear entirely — you're just moving the same tax burden around. Corporate ownership works best when it's redirecting capital that was already going to sit in the corporation anyway.

What You're Giving Up With Corporate Ownership

• The policy becomes a corporate asset — exposed to any creditor risk the corporation carries, unless structured through a Holdco.
• If you sell the corporation or change your structure later, the policy needs to be dealt with as part of that transaction.
• The death benefit goes to the corporation first, not directly to your family — it then needs to be paid out via a capital dividend, which involves your accountant's filing.
• Multiple shareholders means the policy's value and any related buy-sell arrangement affects everyone's interests, not just yours.

Go Deeper

The full mechanics of corporate ownership — the owner/payor/beneficiary structure, the Capital Dividend Account, and when it doesn't make sense — are covered on the Corporate-Owned Life Insurance page. If your corporation is specifically sitting on retained earnings you don't expect to spend, see Corporate Wealth Transfer for the full investing-vs-insurance comparison.

Frequently Asked Questions