Corporate-Owned Critical Insurance
What is it?
Corporate-Owned Critical Illness Insurance is a specialized type of insurance policy designed to protect businesses from the financial impact of a key employee or owner being diagnosed with a critical illness. Here are the key aspects of Corporate-Owned Critical Illness Insurance:
Benefits to the Business
- Financial Protection: Provides a tax-free lump sum to the company if a covered individual is diagnosed with a critical illness.
- Business Continuity: Helps cover costs associated with temporary replacement, training, or business disruption.
- Key Person Protection: Safeguards against the financial impact of losing a crucial team member temporarily or permanently
Purpose and Structure
The policy is owned and paid for by the corporation
It covers specific critical illnesses for key employees or owners
The corporation is typically the beneficiary of the policy
Tax Advantages
Premiums are generally paid with after-tax corporate dollars
The benefit received by the corporation is tax-free
Can be more tax-efficient than personally-owned policies for business owners
Flexibility
Can be structured as part of a shared ownership arrangement, allowing both the company and the individual to benefit
May include return of premium options if no claim is made
The Bottom Line
Corporate-Owned Critical Illness Insurance serves as a valuable risk management tool, providing businesses with financial protection and flexibility in dealing with the potential impact of critical illnesses affecting key personnel.