Our office will be closed from December 24 through January 1, reopening January 2 🎄✨ Wishing you a happy holiday season!
Life Insurance: Should You Buy It Personally or Through Your Corporation?
Life insurance is one of those things most of us know we should have… but when the quote comes in, it can feel expensive.
As business owners, many people immediately ask:
“Can I just pay for this through my corporation instead of personally?”
We get this question all the time at Accent CPA. While using corporate dollars can sometimes make sense, it isn’t always the best option for everyone. The right answer depends on your goals, your business structure, and how you plan to use the insurance down the road.
Let’s break it down.
Buying Life Insurance Personally
This is the most straightforward option. You personally own the policy, pay the premiums with after-tax personal dollars, and your beneficiaries receive the payout tax-free when you pass away.
Pros
- Simple and easy to set up
- Proceeds (tax-free) go directly to your beneficiaries (who do not have to be shareholders)
- No corporate complexity
- Works well for income replacement, mortgage protection, and family security
Cons
- Premiums are paid with after-tax personal income
- Can feel more expensive compared to using corporate funds
- Personal ownership is often the best fit when your main goal is protecting your family and personal lifestyle.
Buying Life Insurance Through Your Corporation
In this case, your corporation owns the policy and pays the premiums using corporate dollars. This can feel attractive because corporate tax rates are often lower than personal tax rates, meaning it may feel easier for the business to handle the premiums from a cash flow perspective.
Pros
- Premiums paid with corporate dollars (often taxed lower than personal income)
- Can be useful for business succession planning
- Can help fund buy-sell agreements between shareholders
- Death benefit is generally paid to the corporation tax-free
In many cases, part of the payout may be added to the Capital Dividend Account (CDA), which can then allow funds to flow to shareholders tax-free.
Cons
- More complex structure and tax planning required
- Not always ideal if the goal is purely personal family protection
- Premiums are generally not tax-deductible
- Accessing funds personally can require planning
Corporate-owned insurance tends to work best when:
- There are multiple shareholders
- You’re planning for business succession
- You want to leave corporate assets efficiently
So… Which Is Better?
The honest answer, it depends.
Some people benefit greatly from corporate-owned insurance.
Others are far better off keeping it personal.
In many cases, a combination of both makes the most sense.
Here are a few questions we usually walk through with clients:
- Is the main goal family protection or business planning?
- Are there shareholders or partners involved?
- Will the corporation have excess cash long-term?
- How do you want funds distributed in the future?
What sounds cheaper upfront isn’t always the most tax-efficient in the long run.
Choosing between personal and corporate life insurance isn’t a one-size-fits-all decision. It works best when your accountant and financial advisor are aligned and looking at the full picture — your business, your family, and your long-term goals.
At Accent CPA, we’re happy to meet with you and your advisor to walk through the options, explain the tax impacts, and help determine what structure best suits your unique situation. With trusted advice and personal service, we’ll help you make confident, informed decisions that support both your business and your future.