Corporate & Key Person Life
Corporate Life Insurance for Alberta Business Owners
Key person cover, buy-sell funding and corporate-owned policies — for businesses where one person's absence would be a financial event, not just a sad one.
- Incorporated contractors and owner operators who personally guaranteed equipment loans or an operating line
- Businesses with two or more owners — whether or not a buy-sell agreement exists
- Companies that depend on one person's licence, relationships or expertise
- Owners whose corporation is holding retained earnings
Mansher Waraich · Commercial Insurance Broker
Sonic Insurance · Serving Alberta, Canada
About Corporate Life Insurance
Personal life insurance answers what happens to your family. Corporate life insurance answers what happens to the business — the loan you personally guaranteed, the partner who suddenly owns half a company with your estate, the customer relationships that lived in one person's head.
Most of the owners I work with already carry something personally. Far fewer have looked at whether the corporation should own a policy, who the beneficiary should be, and whether the shareholders' agreement and the insurance actually agree with each other. That gap is usually where the money is.
These are life and living benefits products, so they are arranged through MSW Financial rather than through the commercial side. Same person, same conversation — the paperwork lives somewhere else, and so does the licence.
Who this is for
- Incorporated contractors and owner operators who personally guaranteed equipment loans or an operating line
- Businesses with two or more owners — whether or not a buy-sell agreement exists
- Companies that depend on one person's licence, relationships or expertise
- Owners whose corporation is holding retained earnings
- Businesses where a lender made life coverage a condition of financing
- Family businesses planning a transfer to the next generation
Rather just talk it through?
Call or email directly. You will reach Mansher, not a call centre.
Mansher Waraich · Commercial Insurance Broker
Sonic Insurance · Alberta, Canada
What corporate life insurance is bought to solve
Each of these is a cash problem that lands at the worst possible moment, when the business has also just lost the person who would normally have solved it.
- A business loan, equipment loan or operating line personally guaranteed by an owner
- Surviving owners needing cash to buy a deceased owner's shares — rather than finding themselves in business with the estate
- A buy-sell agreement that exists on paper with no money behind it
- The loss of a key person whose licence, relationships or expertise the business cannot quickly replace
- A lender, franchisor or major contract requiring life coverage to stay in place
- The cost of pulling money out of the corporation personally in order to fund personal coverage
- A family inheriting a business they cannot run, cannot easily sell, and did not ask for
How corporate life coverage is usually structured
The product is ordinary life insurance. What makes it corporate is who owns it, who pays for it and who receives the proceeds — and those three answers are the whole conversation.
Key person insurance
The business owns the policy on the life of an owner or key employee, pays the premium and receives the benefit. It buys the company time: to recruit, to reassure lenders and customers, and to absorb the revenue it just lost.
Buy-sell funding
Coverage arranged so surviving owners can purchase a deceased owner's share under a buy-sell agreement. Whether the policies are owned by the shareholders personally or by the corporation changes the tax result, so this is set up alongside your accountant and lawyer.
Corporate-owned term
Coverage for a defined period — commonly matched to the length of a loan or the years until a planned exit. Usually the least expensive way to cover a debt that will eventually be gone.
Corporate-owned permanent
Coverage that does not expire, with a cash value held inside the company. Used where the need is lifelong rather than tied to a loan, and in estate and succession planning.
Collateral assignment
A policy assigned to a lender as security, which is what a bank often means when it makes insurance a condition of financing. The assignment is released once the debt is repaid.
Estate equalisation
Where one child takes over the business and others do not, insurance proceeds can balance the inheritance without forcing the business to be sold or stripped of cash.
Corporate-owned critical illness
A living benefit: a lump sum paid to the business on diagnosis of a covered condition as defined in the contract. An owner who survives a serious illness but cannot work for a year is a scenario life insurance does not answer.
What has to be settled before a policy is issued
- 1Who owns the policy — the corporation or the individual — and which of them pays the premium
- 2Who the beneficiary is, and whether that matches what the shareholders' agreement actually says
- 3Whether a buy-sell agreement exists, and whether its funding method matches the policies in force
- 4How the business is valued, and how often that valuation gets revisited
- 5Medical and financial underwriting on each life insured
- 6The tax treatment of premiums, proceeds and the capital dividend account — a question for your accountant, not for me
- 7All coverage is subject to insurer underwriting and acceptance. Nothing is in place until a policy is issued
FAQ
Common questions
Should the corporation own the policy, or should I?
It depends on what the money has to do. Coverage meant to protect a family is usually owned personally; coverage meant to fund a buy-sell, satisfy a lender or keep the business running is often owned by the corporation. The two routes have different tax consequences on premiums and on proceeds, which is why this gets decided with your accountant in the room rather than on a quote.
What is the difference between key person insurance and buy-sell funding?
Key person coverage replaces what the business loses when someone central to it dies — revenue, time, borrowing capacity. Buy-sell funding does something narrower: it puts cash in the right hands to purchase that person's shares. A business with partners and a loan often needs both, and they are frequently confused for each other.
We already have a shareholders' agreement. Isn't that enough?
An agreement states what must happen. It does not create the money to do it. A buy-sell clause obliging surviving owners to purchase a deceased partner's shares is only as good as their ability to find that amount quickly, and few operating businesses can. Insurance is the common way to fund the obligation the agreement creates.
Are the premiums a deductible business expense?
Generally not, even when the corporation owns the policy and pays the premium. There is a limited exception where a lender requires the policy as collateral for a loan, and part of the premium may then be deductible. Treatment turns on the specifics, so confirm it with your accountant before assuming either way — I am a broker, not a tax advisor.
Why does this go through MSW Financial when my commercial policies go through Sonic Insurance?
Because they are different licences. Commercial property and casualty business is placed through Sonic Insurance; life, critical illness and disability business is arranged through MSW Financial. Same person either way — two sets of paperwork, and two regulators who care which name is on which file.
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Tell me what the business does and what is coming up. If a certificate or a renewal is driving the timeline, say so — it changes how I work the file.
The coverages described on this page are general information only. Availability, limits, deductibles, conditions and exclusions vary by insurer and by policy, and all coverage is subject to insurer underwriting and acceptance. Nothing here amends a policy or confirms that coverage is in place. This is not legal advice — refer to your policy wording and speak with me about your specific situation.
Corporate life insurance is a life and living benefits product, arranged through MSW Financial; commercial property and casualty business is placed through Sonic Insurance. Nothing on this page is tax, legal or accounting advice. The ownership, beneficiary and tax treatment of a corporate-owned policy should be confirmed with your accountant and lawyer before a policy is put in place.