Split Dollar Critical Illness for Business Owners

Split Dollar Critical Illness for Business Owners

Shared ownership arrangements using critical illness insurance

If you are an incorporated business owner you can own a critical illness plan jointly with your corp using tax effective corporate rate income tax dollars. Pair this plan up with an inexpensive Return of Premium rider to get all of your money back in 15 years if you haven’t made a claim!

What is critical illness insurance?

There is one way to protect yourself from ruinous financial obligations if diagnosed with a life-threatening illness. Critical illness insurance is a form of term insurance that pays a tax-free lump sum living benefit to an insured who is diagnosed with and survives an illness covered by the policy.

Critical illness insurance has only recently become popular in Canada. It was introduced in the early 1990s to fill the gap between life and disability insurance. This unique niche in the insurance market recognizes that with increasing longevity in our population, the probability of becoming seriously ill is greater, as is the chance of surviving.

Once you are eligible for a benefit under a critical illness policy, you will receive a lump-sum amount to use as you see fit, whether it be to pay for lifestyle adjustments, medical bills or a vacation. You do not have to be disabled to receive the benefit, which you should receive within 30 days of being diagnosed with a covered critical illness. This is quite a contrast from disability insurance, which pays benefits on a monthly basis, replaces a certain percentage of income and usually imposes a waiting period of up to 180 days before payments commence. In addition, benefits from a critical care policy will not jeopardize any benefits that you are eligible to receive from other disability or health insurance policies.

You do not have to be employed in order to purchase critical illness coverage, as you do with disability insurance. This means that you can still insure yourself against critical illness if your employment situation or income varies greatly and/or is otherwise hard to quantify for the purpose of qualifying for disability insurance. In addition, if your income is too low to make it worthwhile paying disability premiums given the percentage of monthly income benefits that disability coverage pays, then critical illness insurance may be a more cost effective method of insuring against a life-threatening condition.

Call or email our office today to set up a plan that meets your individual or business needs before you’re hit with a critical illness.

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