Corporation-Owned vs. Personal Life Insurance in Canada

If you own a business in Canada, the question of whether to hold life insurance personally or through your corporation can have big consequences for taxes, estate planning, and long-term wealth. Below is an overview of how each option works and when one may be better than the other.

Comparison: Corporate-Owned vs. Personal Life Insurance

Category	Corporate-Owned Life Insurance	Personally-Held Life Insurance
Who owns the policy	Corporation (typically a CCPC)	Individual (business owner or spouse)
Who pays the premiums	Corporation, using after-tax corporate dollars	Individual, using after-tax personal income
Tax deductibility of premiums	Not deductible in most cases	Not deductible in most cases
Cost efficiency	More cost-effective if corporate tax rate is lower than personal rate	Less efficient due to higher personal income tax burden
Death benefit received by	Corporation receives benefit tax-free	Named personal beneficiaries receive it tax-free
Access to death benefit	Paid to corporation, then distributed via Capital Dividend Account (CDA)	Paid directly to beneficiaries without corporate structure
Use of Capital Dividend Account (CDA)	Can credit CDA and allow tax-free distribution to shareholders	Not applicable
Cash value growth	Grows tax-deferred inside the policy (not taxed until withdrawn)	Grows tax-deferred inside the policy
Access to cash value	As a corporate asset (for loans, investments, emergencies)	As personal asset (with fewer complications)
Ideal use case	Estate planning, succession planning, key person protection, tax-efficient wealth transfer	Income replacement, mortgage coverage, personal estate needs
Estate planning complexity	More complex; CDA strategy, share redemptions, shareholder agreements may be required	Simpler estate distribution (especially when heirs are outside the business)
Impact on business valuation	Cash value may increase corporate value; needs careful planning when selling	Not tied to business value or structure
Suitability	Business owners with surplus retained earnings and long-term planning goals	Individuals wanting straightforward personal protection

When Corporate Ownership Is More Beneficial

• You're a shareholder of a private corporation with surplus capital

• You want to minimize personal income withdrawals for insurance

• You want to leave a larger estate via CDA credit

• You need business continuity or succession funding

• You're okay with added legal and administrative steps

When Personal Ownership Is Better

• The insurance is for personal protection (e.g. income replacement, mortgage, family)

• You prefer simplicity and direct payout to family

• You’re planning to sell the business and want to keep insurance outside the company

• You don't want insurance proceeds tied to business structure or valuation

Summary

Factor	Best Option
Lowest after-tax cost	Corporate-Owned
Estate planning via CDA	Corporate-Owned
Simplicity and flexibility	Personal Ownership
Pure personal/family coverage	Personal Ownership
Complex estate needs or succession plans	Corporate-Owned

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