Split-dollar critical illness insurance lets a business and a shareholder or key employee share one critical illness policy. The company protects itself against the illness of an important person. Meanwhile, the individual gets back the premiums if they never claim. As a result, both sides get value from the same policy.
Typically, the corporation owns the critical illness coverage and pays its premium. The individual owns the return-of-premium rider and pays that portion personally.
If the insured person is diagnosed with a covered condition, the corporation receives the lump-sum benefit. It can then use the money to cover lost revenue or hire help.
If there’s no claim, the individual can receive a refund of the premiums paid when the rider matures or if they cancel, depending on the policy terms.
The Canada Revenue Agency looks closely at split-dollar arrangements. So, the premium split must be fair and well documented. We work with your accountant to set it up correctly. For general guidance, see the CRA’s corporation tax pages.
Our experienced consultants can help you:
Contact Nova Star Insurance Consultants today to explore whether split-dollar critical illness insurance suits your business. The first conversation is free.
Send us a message! We’d love to hear from you.