Health Risk Services Inc. has a number of quality, extensive business insurance programs each designed to meet a specific requirement in terms of expenditure and coverage. Designed to meet the requirements and structure of your business but also guaranteed to continue to serve your changing needs when and if your business grows, is streamlined or realigned, you can choose the product and design that is best for you:

It is not uncommon to see a business’s profits or surplus cash invested in GICs or taxable investments. These taxable investments may not always be in business’s best investment option.

If the business or corporation already needs an exempt life insurance policy for key-person insurance, business loan protection or some other business insurance need, the policy could also be used as a vehicle for investing the company’s excess profits.

An exempt, permanent life insurance policy allows for tax-deferred growth of the cash value and tax-free receipt of the proceeds at death. The cash value growth within an exempt policy is not subject to annual accrual taxation and is only subject to tax if there is a disposition of the policy.

Significant cash value can accumulate on a tax-deferred basis if the business deposits the maximum amount permitted by the Income Tax Act into the exempt policy. The deposits can remain within the policy on a tax-sheltered basis and pay for the cost of insurance expenses in future years.

If the corporation or shareholder needs access to the cash at some future date, the policy’s cash surrender value can be accessed through withdrawal or a collateral loan secured against the insurance policy.

Policy withdrawals may trigger some income tax at the time of the withdrawal. Advances to the corporation received as a collateral loan will be tax free and if the proceeds are used to earn income from a business or property, and the other requirements of 20(1)(C) of the Act are met, the interest expense may be deductible for tax purposes.

DISCLAIMER: Please be advised that the information on this web site is intended to present a broad variety of general information as simply and accurately for your knowledge as we possibly can.  In no event does this information form part of or apply as a legal document.  Therefore, please note that rules, conditions and industry practices discussed may be changed over time.  Please consult Health Risk Services Inc. with specific questions

E & O Insurance applies.

Business Owners and Corporations are often looking for innovative ways to supplement benefit packages to both attract and retain key executives. One very accepted and effective way of accomplishing their goal is to offer an Executive Compensation Package that could include well designed insurance products such as life insurance, disability insurance and critical illness insurance.

The products can be structured so as to offer the following benefits to the executive:

1. Life Insurance:

  • Can create additional financial security to cover funeral expenses, educations costs, reduce debt and provide future income for the Executive’s family.
  • The coverage is guaranteed and portable and can follow the executive through his/her career and into retirement.

2. Disability Insurance:

  • Carved out from the regular traditional group coverage, these programs will ensure that the executive maintains his/her regular income with the highest standard of coverage when a disability occurs that prevents him/her from continuing to earn income.
  • A Return of Premium can be built into the coverage to reward the executive for remaining healthy. Up to 50% of the premium paid into the policy every 8 years can be returned to the Executive Tax Free.
  • The coverage is guaranteed and portable and can follow the executive throughout his/her career.

3. Critical Illness Insurance:

  • Will provide financial security in the event of the diagnosis of a critical illness for both the executive and their family. This product will pay out a lump sum, tax free benefit to the executive enabling him/her to make decisions regarding their present situation and future plans, without affecting their assets or savings.
  • A Return of Premium can be built into the product to reward the executive for remaining healthy. Up to 100% of the premium paid into the policy can be returned tax free, dependant on how the plan is structured when purchased.
  • The coverage is guaranteed and portable and can follow the executive throughout his/her career and into retirement.

The policy or policies may be purchased by the business/employer, or it may be owned and funded jointly by the employer and the executive. The executive’s dependants would be named as the beneficiary on any portion of a policy requiring a beneficiary designation.

Any employer paid portion of insurance premium must be reported as a taxable benefit to the Executive. It is also important to remember that the amount of premium reported represents a reasonable cost for the benefit received.

For assistance on establishing an Executive Compensation package for your key executives, please give Health Risk Services a call today!

DISCLAIMER: Please be advised that the information on this web site is intended to present a broad variety of general information as simply and accurately for your knowledge as we possibly can. In no event does this information form part of or apply as a legal document. Therefore, please note that rules, conditions and industry practices discussed may be changed over time. Please consult Health Risk Services Inc. with specific questions.

E & O Insurance applies

Many businesses may appreciate the versatility of Life Insurance products in allowing them to use one policy to meet a dual need!  It is not unusual to encounter a business that requires financial protection that life insurance provides against death, either theirs or someone else’s within the company (i.e. Key Man Insurance) while another person needs a tax-sheltered investment vehicle.

“Split Dollar Life Insurance” can provide for the needs of both parties through ONE Life Insurance policy.  In these types of arrangements, on party typically owns and pays for a level death benefit portion of the policy and the other party owns and funds the remaining interests in the policy.

One example of Split Dollar Life Insurance being used effectively is when an employer needs Key Person Insurance on an executive and the executive is in need of a tax-sheltered investment vehicle. The employer and the executive could enter into a Split Dollar arrangement where the employer pays for and owns a level death benefit on the life of the executive and the executive pays for and owns the cash surrender value component of the policy. The beneficiary of the level death benefit is the employer, while the beneficiary of the cash value is designated by the executive who may choose his/her spouse, children etc.

Please be advised that tax implications on Split Dollar or any other type business insurance program must always be taken into consideration during the design of the program to ensure its long term effectiveness. For additional information on establishing this program for you business or company, please contact Health Risk Services Inc.

DISCLAIMER: Please be advised that the information on this web site is intended to present a broad variety of general information as simply and accurately for your knowledge as we possibly can.  In no event does this information form part of or apply as a legal document.  Therefore, please note that rules, conditions and industry practices discussed may be changed over time.  Please consult Health Risk Services Inc. with specific questions.

E & O Insurance applies

It is absolutely imperative that effective planning must take place for any business to survive the owner’s or another key executive’s death. Unfortunately, it can be extremely difficult to obtain adequate debt financing for a business since creditors will often require the business owner to personally guarantee a loan.

The death of the business owner or key executive may cause creditors to demand immediate repayment of outstanding business debts. The significant burden that this situation places on the business can force the liquidation of key business assets at “fire sale prices” at a time when business results may already be severely impacted by the death. To make matters worse, if the business owner has personally guaranteed the debts incurred by the business, the owner or the owner’s estate may be liable for any outstanding debts that the business is unable to pay! Similar situations of debt can occur if the owner or key executive are affected by either a disability or a critical illness.

SOLUTION: The business purchases Insurance policies on the life of the business owner or key executives.  Proceeds from the policies are tax-free to the company and may be used to pay down the existing debts. Life insurance, disability insurance and critical illness insurance policies all play a necessary part in protecting the company’ s interests and minimizing financial risks. The creditors interests are protected removing any personal liability from heirs and allowing the business to continue deft free!

Health Risk Services Inc. will almost always recommend programs for this type of protection that will be extremely “cost effective” by providing pure insurance for the necessary terms of the loans. Term periods most frequently purchased for business loan protection are:

  1. Annual Renewable Term (rates are guaranteed for 1 year periods only)
  2. Term 10 (rates are guaranteed for 10 years and then increase to the next premium level for the following 10 years)
  3. Term 20 (rates are guaranteed for 20 years and then increase to the next premium level for the following 20 years)

Please note that generally, life insurance premiums paid for business loan protection are not deductible for tax purposes. However, if a life insurance policy has been requested by a restricted financial institution who is requiring the policy to be collaterally assigned to them, a portion of the premiums may be deducted.    

Health Risk Services Inc. always recommends that your accountant play a role in the establishment of appropriate Insurance programs in order to determine the proper tax implications for your business or company.

DISCLAIMER: Please be advised that the information on this web site is intended to present a broad variety of general information as simply and accurately for your knowledge as we possibly can.  In no event does this information form part of or apply as a legal document.  Therefore, please note that rules, conditions and industry practices discussed may be changed over time.  Please consult Health Risk Services Inc. with specific questions.

E & O Insurance applies

Using a life insurance policy can be a very effective way to fund the business tax liability that arises at death! At death, any individual who owns shares in a corporation, a partnership interest, or business assets (such as in the case of a sole proprietorship) will be deemed by CRA to have disposed of these properties.  As a result, a tax liability may arise in the form of capital gains and recaptured capital cost allowance.  If funds or other assets are not available to pay the tax liability the following two situations may arise:

  1. The shares or partnership interest may have to be sold.
  2. Business assets may have to be liquidated, possibly for a price below the fair market value.

Life insurance can provide the necessary funds needed to pay both the:

  • Tax liability that results from the capital gains.
  • Recaptured depreciation triggered by death.

Life Insurance is a particularly valuable funding vehicle if the beneficiaries want to retain the property or if the market conditions will not provide the estate with an amount equal to the fair market value of the property.  The individual could own the life insurance policy or it could be owned by the corporation or partnership and dispersed to the individual’s estate after death. For additional information on this concept and the type of life insurance policy that would suit your particular situation, please contact Health Risk Services Inc.

DISCLAIMER: Please be advised that the information on this web site is intended to present a broad variety of general information as simply and accurately for your knowledge as we possibly can.  In no event does this information form part of or apply as a legal document.  Therefore, please note that rules, conditions and industry practices discussed may be changed over time.  Please consult Health Risk Services Inc. with specific questions.

E & O Insurance applies

If you are an established business owner or an entrepreneur just starting out, it is important for you to be aware of the need to develop a creditor protection strategy. Most business owners, officers and directors don’t realize that their personal assets are at risk for creditor claims in the event that something goes wrong with their business.
In fact, a study has confirmed that three-out-of-four Canadian small business owners have not taken the adequate steps to protect their personal assets!

The types of liability that business owners, officers and directors can be personally liable for are:

  • Any debts for which the business owner, officer or director has given a personal guarantee
  • Any statutory debts such as wages and vacation pay
  • Any source deductions owed to the Canada Revenue Agency
  • Goods and Services Tax and or Provincial Sales Tax
  • Health and safety violations
  • Environmental damage

One of the easiest ways to protect personal assets: Investments with insurance benefits!!

Because certain investment products issued by insurance companies are regulated under the Insurance Act, they have the potential to protect personal assets from creditors in case of personal or professional liability, or a business failure.  CREDITOR PROTECTION IS ONE OF THE MOST VALUABLE BENEFITS of investing through a life insurance company, and in 1996, the Supreme Court of Canada upheld the creditor protection afforded to insurance investments under provincial legislation.

You can gain the comfort in knowing that as long as your investments are made in good faith, and a proper beneficiary is named, you can protect your hard-earned personal savings from professional liability.  In fact, insurance-based investments provide an inexpensive means for you to protect your family’s wealth and provide potential growth from the underlying investment.

For additional information on strategies for protecting personal assets from creditors or tips that can help you manage your risk, please contact Health Risk Services.  We will also be happy to educate you to the most appropriate creditor protection insurance vehicles available for your particular situation!

Let Health Risk Services assist you in making KEY PERSON insurance part of your business plan!!

DISCLAIMER: Please be advised that the information on this web site is intended to present a broad variety of general information as simply and accurately for your knowledge as we possibly can.  In no event does this information form part of or apply as a legal document.  Therefore, please note that rules, conditions and industry practices discussed may be changed over time.  Please consult Health Risk Services Inc. with specific questions.

E & O Insurance applies

Business owners and other key executives spend considerable time and effort to acquire the knowledge, experience, judgment, reputation, relationships and skills that make them a valuable asset to the business! If one of these key people dies, becomes disabled or critically ill, the business loses a key member of the management team and this can have a severe financial impact!

During the disruption that follows the death, disability or critical illness of a key player several things can happen as follows:

  • The business will suffer from the loss of knowledge, expertise and management capability.
  • Lenders may cut back credit.
  • Creditors may press for immediate payment.
  • Debtors may delay making payments.
  • Employees and customer may lose confidence in the business.
  • Competitors may take advantage of the situation.

Unfortunately, finding an immediate replacement for such a valuable resource that maintains the same qualifications of the key person being replaced can be extremely difficult. It usually is very costly in terms of actually finding and training that someone new, as well as meeting their income requirements.

During the time necessary to search for a replacement, the business will experience delays, disruption and reduced efficiency which could result in weakening the financial stability of the business. The impact of such a situation can be considerably reduced if the business has succeeded in establishing a proper plan prior to this event of loss.

This key person business plan should include the purchase of Insurance policies whether life insurance, disability insurance or critical illness insurance to ensure that there will be immediate cash to cover the business’s working capital needs and to find and train a suitable replacement for the person lost. The value of these benefits to the business should far exceed the cost of the insurance!!

Let Health Risk Services assist you in making KEY PERSON insurance part of your business plan!

DISCLAIMER: Please be advised that the information on this web site is intended to present a broad variety of general information as simply and accurately for your knowledge as we possibly can.  In no event does this information form part of or apply as a legal document.  Therefore, please note that rules, conditions and industry practices discussed may be changed over time.  Please consult Health Risk Services Inc. with specific questions.

E & O Insurance applies

Is your business prepared for the death, disability or critical illness of one of its owners?

If your business loses an owner to any one of these 3 situations, the remaining owners must decide how the business will continue.  Generally, you have four options:

  1. You can close down the business, but you likely wouldn’t want to do that after all of the time, energy, commitment and money you have put into it.
  2. You can continue the business with the new owner, but do you want to be in business with this person?  (for example, could be the spouse of a deceased owner).
  3. You can sell your shares, but who will buy them and at what price?
  4. You could purchase the shares from the affected owner or the deceased owner’s estate or the disabled partner’s spouse.

A key component of an integrated financial plan for the succession of a business would include a formal buy-sell agreement.  These agreements cover the terms of ownership and operation of the business.  It usually deals with the death, disability, critical illness and retirement of one of the owners, as well as disagreements about running the business that results in an owner wanting out.

This type of agreement often includes a formula or process for valuing the business to simplify the buy-out of an owner and will generally deal with:

  • Who will buy the shares
  • What the terms of the sale will be
  • When the sale will take place
  • Where the money to buy the shares will come from
  • What the purchase price will be

Proper funding must be in place to ensure that your agreement is viable. After all, without funding in place, agreements can fall apart because the remaining owners, obligated under the terms of the agreement to purchase the departing owner’s shares, may not be in a financial position to do so.

The options available for funding would be:

  • You can start saving today
  • You can borrow the funds from a bank
  • You can take funds from current earnings
  • You can sell assets

You can purchase life insurance, disability insurance and critical illness insurance to provide the funds needed!!

Since there are numerous possible ways to structure a buy-sell agreement, it is important to remember that each method has its own pros and cons and must be considered in the light of the circumstance of each given situation.  Another consideration is whether to fund the agreement with “corporate owned” or “personally owned” insurance.

Remember that there are several advantages to having your buy-sell agreement funded with insurance policies:

  1. Heirs obtain a definitive value for the deceased, disabled or sick partner’s interest.
  2. Surviving partners obtain total and unrestricted ownership of the business.
  3. Depending upon how the Insurance contracts have been structured, insurance proceeds can flow into the business tax free!
  4. Depending upon the nature of the applicable insurance contract (life, disability or critical illness) the proceeds can be realized within a very short and crucial time period.
  5.  Depending upon the type of insurance policy purchased, the longer the policy is in force, the greater the cash surrender value, which can be used to take advantage of other business opportunities.

Health Risk Services is prepared to work with your company to educate you and assist you in either the process of ascertaining the appropriate buy-sell agreement, or if in fact you already have one in place, to identify if the appropriate methods of funding have been addressed. Because there are many important issues to consider in establishing the buy-sell agreement and the funding that is right for you company, Health Risk would recommend that we work along with your other professionals such as accountants and lawyers to make sure that every detail is covered.

DISCLAIMER: Please be advised that the information on this web site is intended to present a broad variety of general information as simply and accurately for your knowledge as we possibly can.  In no event does this information form part of or apply as a legal document.  Therefore, please note that rules, conditions and industry practices discussed may be changed over time.  Please consult Health Risk Services Inc. with specific questions.

E & O Insurance applies