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Corporate-Owned Life Insurance in Barrie, Ontario

What you need to know when insuring your employees

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Corporate-Owned Life Insurance in Barrie, Ontario

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The traditional idea of life insurance is that it is a financial product providing a certain cash payout in an event of the policy holder’s death. However, it becomes much more interesting when the life insurance belongs to a company or corporation.

Curious to learn more? At Walton Financial, we can help you understand all the ins and outs of corporate-owned life insurance in Barrie, Ontario and discover how it can benefit your business.

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What is Corporately-Owned Life Insurance in Barrie, Ontario?

Corporate-owned life insurance (COLI) is an insurance policy taken out by a corporation on one or more critical employees. With this type of insurance, the policy holder (the company) pays regular insurance premiums and receives the death benefit in case of death of a covered employee. The death benefit can then be used to cover the expenses associated with replacing insured employees.

Why Do Corporations Purchase Corporate Life Insurance?
Aside from its obvious advantages (death benefit payouts), corporate-owned life insurance policies are often used by companies to minimize their tax burden on corporately owned traditional investments, succession planning, and legacy and estate planning.

 

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Choosing the Right COLI Policy

You have three choices to invest in with corporately-owned life insurance. As such, you can apply for Term Life, Universal Life, or participating whole life. While there are numerous benefits, certain tax rules must be met in order to get the most out of COLI. In some situations, it is crucial to clearly establish who will be the policy owner, who will be the beneficiary, and who will pay the premium. If this type of life insurance is not placed properly, you may forgo any potential financial and tax advantages.

To make sure that you maximize the positive implications of your corporate-owned life insurance, don’t forget to consult a professional financial and insurance advisor at Walton Financial Group Inc.

Tax-Deferred Cash Value Accumulation

The cash value of corporately-owned life insurance policies is considered to be a corporation’s asset. As such, any unrealized gain in this cash value would be exempt from taxes until the policy is cashed in or the accumulated cash is withdrawn.

Equitable Distribution of Premiums

With corporately-owned life insurance, a company can pay premiums for several individuals regardless of how this cost would vary with individual policies. For example, with individual insurance policies, the premiums would vary based on the shareholder’s age and health condition. With COLI, on the other hand, the premiums are more equally distributed.

Reduced Tax-Cost of Life Insurance Premiums

Corporations have lower tax rates than individuals. This means that when you pay insurance premiums through a business, you can receive a much larger policy for the same amount of premium dollars. Because life insurance premiums are usually paid for many years, these savings can become quite substantial.

Tax-Free Death Benefit

If an insured individual passes away, the death benefit will be received by the corporation. It can then be paid through the individual’s estate or any other beneficiary tax-free as capital dividends.

Creditor Protection

Corporately-owned policies are usually shielded from creditors of an individual shareholder. It is also possible to arrange for the death benefit proceeds to be shielded from the creditors of the business.
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Reap the Many Benefits of COLI with the Help of Walton Financial Group Inc.

While there are numerous benefits when purchasing life insurance through a corporation, it can present a complex endeavor. Shareholder agreements, corporate tax issues, insurance balance accounting, and capital dividends compliance are just a few factors to keep in mind.

If you want to sleep better and be confident in your policy choice, it is always preferred to work with a professional insurance and finance consultant. At Walton Financial Group Inc., we know all the ins and outs of corporate-owned life insurance in Barrie, Ontario, and we will be happy to guide you through the process of obtaining one with ease.

 

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