Disclosure. I am a licensed Financial Security Advisor, Mutual Fund Representative, and Group Insurance & Annuity Plans Advisor. I am not a lawyer, tax lawyer, or accountant. I discuss taxes only as they relate to specific insurance, investment, and estate strategies; I do not provide general tax optimization or comprehensive financial planning. Content is educational only. Mutual funds offered through WhiteHaven Securities Inc. Insurance products offered through iAssure Inc. Coordinate decisions with your CPA, notary, or lawyer. See Disclaimer and Privacy.
Why this is important
The same cash flow can buy twice the coverage when structured through the corporation vs. personal.
Super-funding a corporate policy turns idle HoldCo cash into a tax-efficient estate transfer vehicle.
All numbers are from an insurance carrier illustration and are projections based on stated assumptions. This is an illustrative example, not a guarantee of outcomes.
How shifting perspective from "personal insurance" to "corporate asset" rescued a business family from becoming tax hostages and doubled their estate value
Personal vs Corporate Life Insurance | Key Person Case Study
The Situation
The Family
Business Structure
Two brothers are the owners of a successful corporation
Key Person
Father was not the founder, but has been actively helping throughout the years. He remains an active employee, playing the role of a consultant, providing guidance and advice on business relationships and deals
Father's Age
69 years old
Financial Situation
Corporate Cash
Significant retained earnings in holding company
Upcoming Event
Sale of a subsidiary (additional liquidity incoming)
Residence
Quebec
Original Request
What They Asked For
Personal life insurance for father
Personal Premium Budget
$1,000/month ($12,000/year)
Personal Coverage
$300,000 permanent coverage
The Discovery
The Missing Bigger Picture
We were missing the bigger picture: extraction planning for corporate cash. Personal insurance was the most expensive way to solve their problem
The Opportunity
Corporate-owned policy as a long-term cash extraction strategy. Taking money out of the corporation tax-free is not easily done, but this strategy makes it possible
1
The "Apples-to-Apples" Comparison
Same gross cost, different structure
Personal Plan (The Trap)
What They Wanted
→Personal premium: $1,000/month ($12,000/year)
→Coverage: $300,000
The Hidden Cost
→To get $12,000 net personally, they need to pull dividends
→At Quebec's top rate, that requires ~$23,400 gross corporate profits
→They were paying a ~95% tax markup on premiums
The Problem
Paying premiums with "53-cent tax dollars" instead of "12-cent tax dollars"
→Corporation pays with "12-cent tax dollars" (active business income)
→Same ~$24k gross cost to the company
→2x the coverage
→Through the CDA, we can get the total or nearly total death benefit paid out to the brothers tax-free
The Win
Same gross cash flow buys double the coverage
Chapter 1 Result
For roughly the same gross cost (~$24k/year), the corporate policy secured $600,000 of coverage vs. $300,000 personal. The corporate plan instantly provided 2x the benefit.
2
The Optimization (Super-Funding)
Using idle HoldCo cash as a tax-efficient investment vehicle
The Opportunity
The business had high liquidity with more coming from a subsidiary sale. Leaving this cash in a taxable bank account was inefficient. Any growth inside a tax-exempt life insurance policy is tax-sheltered.
For successful business owners in Canada, extraction of cash from the corporation must be planned as early as possible. This is the step where we see the highest penalization from Canada Revenue Agency. The moment you start taking money out, taxes become a major issue. Taking money out tax-free is not easily done, but strategies that use life insurance as a shelter for corporate investment accounts can make it possible.
Minimum Premium
~$24,150/year
Super-Funded Premium
$42,673/year
By adding an extra ~$18,500/year, they created a tax-free investment vehicle inside the corporation.
Projected Result at Age 85 (Year 16)
Based on 6% assumed net rate on investments
Total Death Benefit
$1,104,024
Payable tax-free to corporation
CDA Credit Generated
$648,952
Can be extracted tax-free
Net to Family (After All Taxes)
~$882,400
CDA portion tax-free, balance as dividend
Note: The remaining balance after CDA (~$455k) is paid as a taxable dividend. Total net to family after all taxes: ~$882,400.
3
The Investment Comparison
What if they just kept the $42,673/year in the HoldCo and invested it?
Option A: Invest in HoldCo (Stocks/Bonds)
Investment Growth
→Annual contribution: $42,673
→Gross return assumption: 6%
→Time period: 16 years
The Tax Drag
→Corporate tax on passive income: ~50.17%
→6% gross becomes ~3% net
→Accumulated value at age 85: ~$860,000
The Extraction Tax
→Money still "stuck" in corporation at death
→Paid as dividend, taxed at ~48.7%
→Personal tax bill: ~$418,900
Net Cash to Heirs
~$441,100
Option B: Corporate Insurance Strategy
Policy Structure
→Annual premium: $42,673
→Net return assumption: 6%
→Time period: 16 years
Tax Treatment
→Annual tax on growth: $0 (Tax-Deferred)
→Death benefit to corporation: Tax-Free
→CDA portion to heirs: Tax-Free
The Extraction
→Death benefit creates CDA credit
→CDA portion flows out 100% tax-free
→Balance as taxable dividend
Net Cash to Heirs
~$882,400
The Final Verdict
Strategy
Net Cash to Heirs (After Tax)
Option A: Invest in Corp (Stocks/Bonds)
$441,100
Option B: Corporate Insurance Strategy
$882,400
The Difference
+$441,300 (+100%)
Key Insight
By using corporate-owned insurance as an extraction strategy, we doubled the net wealth transferred to the family compared to a standard corporate investment account. We did not just "buy insurance." We rescued over $440,000 that would have otherwise been lost to corporate and personal taxes. This is why extraction must be planned early. Without proper planning, business owners can become hostages of Canada Revenue Agency when cash stays stuck in the corporation due to the tax liability that is due when you take it out.
Key Takeaways
What this case study demonstrates
Ownership Structure Matters
The same premium budget bought 2x the coverage when structured through the corporation. Personal ownership meant paying with "53-cent dollars" vs. "12-cent dollars."
Idle Cash Has a Cost
Leaving cash in a taxable corporate account meant a ~50% tax drag on growth. The insurance policy allowed tax-deferred accumulation and tax-efficient extraction through the CDA.
Think "Corporate Asset" Not "Personal Insurance"
The brothers came asking for personal insurance. By reframing the question as "How do we transfer corporate wealth efficiently?", we found a solution that doubled the outcome.
Look at Total Net Worth Together
When planning extraction, we need full awareness of the whole business and family situation. We must look at the total net worth of the group of entities together: holding company, operating companies, and shareholders. This allows us to optimize the total net worth, not just individual pieces.
Important Considerations
•This is an illustrative example based on carrier projections; actual results will vary
•Tax rates and regulations are subject to change
•Life insurance requires underwriting and insurability
•This illustration uses Level Cost of Insurance (LCI), which is the safer product structure. Insurance costs remain level rather than increasing with age
•Coordinate with your CPA, lawyer, and insurance advisor
Is This Strategy Right for You?
This strategy may be appropriate for:
Business owners with Key Persons in the company
Corporations with surplus cash or upcoming liquidity events
Those currently paying personal life insurance premiums
Families seeking tax-efficient estate transfer strategies
Individuals in good health who can qualify for insurance
Illustration Assumptions & Source
Policy Details (Universal Life)
Insured Age: 69 years old
Minimum Annual Premium: ~$24,150
Super-Funded Annual Premium: $42,673
Life Expectancy: 85 years old
Projected Net Rate on Investments: 6.00%
Cost Structure: Level Cost of Insurance (LCI)
Comparative Investment Account
Annual Contribution: $42,673
Projected Gross Return: 6.00%
Corporate Tax on Passive Income: ~50.17%
Effective Net Return: ~3%
Tax Assumptions (Quebec)
Corporate Tax Rate on Passive Income: ~50.17%
Personal Dividend Tax Rate (Top Bracket): ~48.7%
Small Business Tax Rate: ~12%
Source: Insurance carrier illustration, January 2026. Numbers are anonymized. This illustration is for educational purposes only and is not a guarantee of future results. Actual results will depend on investment performance, tax rates, and individual circumstances.
Are You Paying Personal Premiums?
If you own a corporation and pay personal life insurance premiums, there may be a more efficient structure. I can run a comparison based on your situation.
Life Insurance, Estate Strategies, Corporate Investing, Tax Strategies, Key Person Insurance
Full Disclosure.
This content is for information and education only. It explains general concepts that may apply to incorporated business owners, but it is not personalized tax, legal, or investment advice.
Tax Considerations:
Tax rules are complex and subject to change
Strategies and benefits depend on your specific circumstances, province, and business structure
Always consult with a qualified CPA before implementing any tax strategy
Provincial variations in rates and rules may apply (Québec vs. Ontario differences exist)
Past tax treatment does not guarantee future treatment
Investment Risk Disclosure:
Investing involves risk, including the possible loss of principal
There is no guarantee that any investment strategy will achieve its objectives
Investment values fluctuate with market conditions, and you may receive less than you originally invested
Tax efficiency is one factor; risk, fees, and total returns all matter
Past performance does not guarantee future results
Insurance Illustrations:
Insurance illustrations show projected values based on assumptions that may not be guaranteed
Actual results will vary based on factors including interest rates, mortality experience, and expenses
Non-guaranteed elements (such as dividends or credited interest rates) are not promises of future performance
Review both guaranteed and non-guaranteed projections with your advisor before making decisions
Content Accuracy:
We strive to ensure information is accurate and current, but laws and regulations change frequently
Information reflects our understanding at the time of publication and may not reflect subsequent changes
If you believe any content contains an error, please contact us
Regulatory:
Mutual funds are offered through WhiteHaven Securities Inc.
Insurance products and certain other services are provided through iAssure Inc., an independent firm in the insurance of persons and in the group insurance of persons
These activities are neither the business nor the responsibility of WhiteHaven Securities Inc.
Professional Advice:
This article is not a substitute for professional advice from your CPA, lawyer, or financial advisor
Work with your professional team to understand how these concepts apply to your specific situation
For personalized advice, a formal engagement and suitability review are required
