Business owners: Should you own life insurance personally or through your corporation?

If you’re a business owner, life insurance can play a much bigger role than just personal protection.

It can help cover taxes, protect your company, support succession planning, and even improve tax efficiency. But one key question often comes up early in the conversation:

Should the life insurance be owned personally – or through your corporation?

There’s no single right answer. The best structure depends on how your business is set up, how you’re paid, and what you want the insurance to do. Let’s walk through the options.

First, what does “ownership” really mean?

Life insurance ownership determines:

• Who pays the premiums
• Who receives the death benefit
• How the policy is taxed
• How it fits into your broader business and personal planning
   

In most cases, business owners are deciding between personally owned life insurance or corporately owned life insurance.

Each comes with different advantages and trade-offs.

Option 1: Personally owned life insurance

With personal ownership:

• You own the policy
• You pay the premiums (usually with after-tax dollars)
• Your chosen beneficiary receives the payout
   

When personal ownership can make sense

Personal ownership is often a good fit if the goal is to:

• Protect your family’s lifestyle
• Cover personal debts like a mortgage
• Create an inheritance or legacy for the next generation
• Equalize an estate among children
• Keep things simple and flexible
   

Because the policy is outside the corporation, it’s not affected by changes to your business, partners, or shareholders.

Pros of personal ownership

• Clear and straightforward
• Full control over beneficiaries
• Not tied to the business if it’s sold or closed
• Ideal for family-focused planning
   

Things to keep in mind

• Premiums are paid with personal, after-tax income
• There are no direct corporate tax advantages
• May be less efficient if you have excess cash sitting inside your corporation
   

Option 2: Corporately owned life insurance

With corporate ownership:

• The corporation owns the policy
• The corporation pays the premiums
• The corporation receives the death benefit
   

This approach is common for incorporated business owners, especially professionals and entrepreneurs who retain earnings in their company.

When corporate ownership can make sense

Corporate ownership is often used when insurance is meant to:

• Fund shareholder buy-sell agreements
• Protect against the loss of a key person in the business
• Cover capital gains tax at death
• Move corporate dollars to heirs in a tax-efficient way
• Use excess retained earnings strategically
   

Pros of corporate ownership

• Premiums are paid with corporate dollars
• Often more tax-efficient than paying personally
• Can support business continuity planning
• Death benefit may create a credit to the Capital Dividend Account (CDA), allowing tax-free payments to shareholders or estates
   

Things to keep in mind

• More complex structure
• Tied to the corporation’s future
• Requires coordination with your accountant and lawyer
• Not ideal for purely personal protection goals
   

Understanding the tax difference

This is often where the conversation really starts to click for business owners. The key difference between personal and corporate ownership comes down to where the premium dollars are coming from and how much tax you’ve already paid on that money. That difference alone can have a meaningful impact on cost, efficiency, and flexibility over time.

Personal ownership

• You earn income
• Pay personal tax
• Use what’s left to pay premiums
   

Corporate ownership

• Corporation earns income
• Pays corporate tax (often lower than personal tax)
• Uses retained earnings to pay premiums
   

Over time, paying premiums with corporate dollars can mean more insurance coverage for the same cost, especially for business owners in high tax brackets.

How does it work? The insurance itself doesn’t cost less just because it’s owned by a corporation. What changes is how much income you need to earn to pay for it. When premiums are paid personally, they come from after-tax income. When they’re paid through a corporation, they’re often funded with retained earnings that have been taxed at a lower rate. That difference can allow business owners to either secure more coverage for the same overall cost, or maintain the same coverage while using fewer pre-tax dollars.

That said, tax rules matter. How the policy is structured, the type of insurance, and how the benefit is eventually paid out all affect the outcome. This is why planning matters.

Taxes are often the first thing business owners focus on when comparing personal and corporate ownership – and for good reason. But tax efficiency is only part of the story. How the policy is designed, and whether it’s meant to last for the long term, also plays an important role. This is where permanent life insurance enters the conversation, because unlike term insurance, it can build value over time and create additional planning opportunities beyond just the death benefit.

What about accessing the money later?

Permanent life insurance can build cash value over time. How that value is accessed depends on who owns the policy.

Personally owned policy: cash value can be accessed personally, depending on the policy design.

Corporately owned policy: access must be structured carefully to avoid unintended tax consequences.

This is not a “set it and forget it” decision. Ownership affects flexibility down the road.

Common situations we see with business owners

Here are a few real-world examples:

• Incorporated professional with retained earnings: Corporate ownership is often more efficient.
• Entrepreneur with young children: Personal ownership may be better for family protection.
• Business partners: Corporate ownership can support buy-sell agreements.
• Owner nearing retirement: Structure depends on succession, taxes, and estate goals.
• Often, the right answer is not either/or; it’s a combination of both.
   

Why this decision should never be made in isolation

Life insurance touches so many different areas of your financial life, including tax planning, estate planning, business succession and cash flow planning.

That’s why we don’t start with a product.

We begin by understanding:

• How your business is structured
• How you’re paid
• What you want the insurance to accomplish
• Who else is involved in your planning (accountant, lawyer, financial planner)
   

From there, we analyze your options and explain them in plain language, so you can make decisions with clarity and confidence.

The bottom line

Personally owned and corporately owned life insurance both have a place in business owner planning.

The key is to choose the right structure for your goals, business, and long-term plans.

If you’re unsure whether your current setup still makes sense – or if you’ve never reviewed it at all – that's a good place to start.

Thinking about your next step?

A conversation can often uncover opportunities, risks, or efficiencies you didn’t know were there. We’re here to help you understand your options and build a strategy that evolves with your business and your life.