Alternative Asset Class

Financial diversification, protection, accessible liquidity, tax-advantages, guaranteed returns, potential dividends, retirement, and estate planning and preservation are all attributes our business clients look for in developing a comprehensive corporate financial strategy. Corporate-owned participating whole life insurance (also referred to as par life or dividend whole life) is a unique alternative asset class, an all-in-one financial solution that provides all these advantageous attributes and protects corporate and business interests against unforeseeable risks.

When structured using one of our Bank On Whole Life™ concepts, a corporate-owned participating whole life insurance policy is a powerful asset that not only offers your company insurance protection and a tax-free death benefit but a cash value. 

This cash value is a supercharged asset that provides your business with accessible, liquid capital that builds equity year over year through guaranteed returns and potential dividend earnings. You can leverage the equity in your corporate-owned participating whole life insurance policy’s cash value to finance business expenses, expand your business, or use as collateral for other sources of business financing. By leveraging this equity, you can also reduce tax implications*.

Another key benefit of incorporating corporate-owned participating whole life as a tax-advantageous asset in your company’s overall financial strategy is the funds from other taxable investments can be re-allocated into your policy. Investments in an exempt corporate-owned whole life policy grow tax-free. Policy proceeds can be paid tax-free to the corporation with no deferred gains.** The amount of the death benefit in excess of the policy’s Adjusted Cost Basis (ACB) can be paid as a tax-free capital dividend to the shareholder’s estate.

As a shareholder, corporate-owned participating whole life insurance is also a proven asset that reduces investment volatility and risk, thereby creating more certainty in raising estate value. The historical stability of policy dividends paid out to policyholders from participating whole life also bodes well for long-term growth potential and wealth-building.

*Participating whole life insurance is codified and protected legally under both provincial and territory insurance acts with taxation addressed in section 148 of the Income Tax Act and regulations. As an asset, participating whole life is not considered “capital property” and therefore is excluded of capital gains or losses in accordance with section 39(1)(a)(iii) of the Income Tax Act.

**Excluded from actuarial taxation in subsection 12.2(1) of the Income Tax Act. 

Immediate Financing Arrangement

Immediate Financing Arrangement (IFA) is a line of credit which helps a successful business owner or high net worth individuals achieve estate planning objectives while also satisfying immediate investment intentions.

It is important to note that eligibility for corporate-owned whole life insurance policies is subject to strict conditions. There must be a proven financial need for life insurance, or the policy will not be approved.

In this scenario, the funding inherent to the buy-sell agreement is a common way to meet this need—a strategy that might also be met with an Immediate Financial Arrangement (IFA) or a term policy.

Business owners must show sound financials with the ability to pay the premiums. It’s important to note that physical health is also a variable in deeming eligibility of a whole life policy. Extra premiums costs may be incurred by those with health risks or other impairments that could deem you ineligible or issued what is known as a rated premium (higher cost) to account for the additional risk the insurance company is taking on by offering coverage.