Individual Products

Living Benefits:

When you are healthy you probably don't consider the possibility of a life altering illness. Now may be the best time to consider the financial impact a critical illness could have on your family and your finances; chances are you know someone who has suffered a serious disability or long-term illness. Unfortunately there are a number of financial issues that arise when such devastation occurs.

Critical Illness, disability insurance and long-term care insurance provide benefits that are significant to your financial well being and health because of the impact that a disability can have. Living Benefits are insurance policies specifically designed to provide you with the resources to meet your financial obligation should you suffer a disability or long-term illness. They are available at a reasonable cost and are paid out on a "tax free basis".

Consider the following facts:

  • Critical Illness Insurance: provides a lump sum taxfree payout 30 days after the diagnosis of a covered condition, (23 illnesses covered). The lump sum payment will help you maintain your lifestyle and your financial health. You choose the level of coverage that meets your needs. In the event that you never make a claim for an illness, you will receive back all of the premiums that you have paid.
  • Long Term Care Insurance: allows you to plan for the quality of care you want; it provides you with the support required to maintain your day-to-day activities should a chronic illness or cognitive impairment keep you from being able to take care of yourself. This is available on a "facility" or "home-care" basis.
  • Disability Insurance: designed to protect you from loss of income. Benefits can be paid up to age 65. It's the only sure way to provide a guaranteed income. This benefit is paid as long as you are "unable to perform the substantial duties of your regular occupation."

Our financial management experts can work with you to customize a policy that meets your requirements and ongoing "living benefit" needs

Understanding Taxation of Critical Illness Insurance

Policy structured for corporate protection

Purpose of Insurance: Structure:
  • To provide a cash benefit to the corporation in the event a key employee or shareholder of a corporation is:
    • Diagnosed with a critical illness covered in the contract, and
    • Survives the waiting period
  • The benefit can provide the corporation with the financial flexibility needed to:
    • Meet the immediate cash needs of the company and to find a replacement for a key employee
    • Repay business debts
    • Fund buy-sell obligations
    • Maintain premium payments to existing corporate insurance plans.
  • Insured: Key employee or shareholder
  • Owner: Corporation
  • Premium Payor: Corporation
  • Benefits Payable to: Corporation
Tax Treatment: Planning Points:
  • Premium is a non-deductible expenditure by the corporation.
  • Cash benefits and Return of Premiums benefits are non-taxable* to the corporation.
  • If the corporation pays the cash benefit, or a portion of the benefit, to the employee or shareholder, depending upon the purpose of the payment, the amount may be included in the income of the employee or shareholder either as:
    • An employee benefit
    • A shareholder benefit
    • A dividend (i.e. on the redemption of shares under buy-sell obligations)
  • If the corporation no longer needs the critical illness insurance policy for corporate protection, it can be transfer ownership to the insured employee or shareholder without tax consequences* to the corporation; however:
    • The employee or shareholder would have to include in his or her income the amount by which the fair market value of the policy exceeds the amount paid for it.
    • The amount included in the employee shareholder's income would only be deductible to the corporation if it were provided as am employee benefit.
      Tip: If the benefit is to be received by a shareholder, transferring the policy as a dividend may allow the individual to benefit from the lower personal tax rates that apply to dividend income.
  • Sharing ownership of a policy by having the corporation own any pay for part of the policy, and the employee or shareholder the other part, should be examined carefully to determine if it would result in a taxable benefit to the employee or shareholder.

* Provided the policy is accident and sickness insurance. The CRA has confirmed that it views critical illness insurance policies providing no Return of Premium benefits as accident and sickness insurance. It has not confirmed this view for policies containing Return of Premium benefits.


Personally - Owned Policy:
Purpose of Insurance: Structure:
  • To provide a cash benefit to the person insured under the contract in the event he/she is:
    • Diagnosed with a critical illness covered in the contract, and survives the waiting period.
  • The benefit can provide financial flexibility so the individual can focus on recovery. Needs may include:
    • Medical expenses not covered under government plans
    • Pay down or pay off mortgage debt, credit card debt or personal lines of credit
    • Home renovations required to make living space suitable
    • Pay a hired replacement to ensure the continuation of an unincorporated business
    • Replacing caregiver's (e.g.: spouse) lost income.
  • The insured person would generally:
    • Own the policy
    • Pay the premium, and
    • Receive all benefits under the contract.
Tax Treatment: Planning Points:
  • Premium is a non-deductible personal living expense.
  • Cash benefits and Return of Premium benefits are non-taxable"
  • Return of Premium on Death benefits received by the owner's estate are subject to probate taxes (depending upon the owner's province of residence)
  • Qualifying medical expenses will still be eligible for the non-refundable medical expense tax credit even though the critical illness insurance benefit has been used to pay them.
  • As it is possible that the person insured on a critical illness insurance policy may not be in a state to manage his or her financial affairs at the time of the critical illness insurance benefits is payable, having a Power of Attorney in place is advisable.
  • Another option is to have the proceeds of a critical illness policy payable to someone other than the owner and or insured. In contract to the life insurance, a beneficiary designation under critical illness policies is allowed only in the province of Quebec. In provinces outside of Quebec, a Direction to Pay can be used to pay the cash benefit to someone other than the owner/insured. A Direction to Pay is simply a written request from the policy owner to the insurer. Asking the insurer to pay the proceeds to a third party.
    • Unlike a Beneficiary Designation, a Direction to Pay never provides creditor protection.
    • A Direction to Pay cannot be used in relation to a Return of Premium on Death Benefit (ROPD). The ROPD Benefit will only be paid to the owner's estate.
    • Caution should be used in making a Direction to Pay or Beneficiary Designation (in Quebec). The directee/beneficiary will receive the cash benefit under the policy regardless of the severity of the owner/insured's illness.

Individual policy structured to provide an employee benefit:
Purpose of Insurance: Structure:
  • To provide an employee with an employment benefit in the event he/she is:
    • Diagnosed with a critical illness covered in the contract, and
    • Survives the waiting period.
  • The benefit can provide financial flexibility at a time of need so the individual can focus on recovery. Needs may include:
    • Medical expenses not covered under government plans
    • Pay down or pay off mortgage debt, credit card debt or personal lines of credit
    • Home renovations required to make living space suitable
    • Replacing caregiver's e.g.: (spouse) lost income.
  • Insured: Employee
  • Owner: Corporation or employee, depending upon the structure
  • Premium Payor: Corporation
  • Benefits Payable to: Depending upon the structure, the corporation or the employee would receive the cash benefit under the contract.
Tax Treatment: Planning Points:
  • Note: The tax treatment detailed here would not apply if the benefit were provided to a shareholder (who may also be an employee) in his/her capacity as a shareholder.
Employee Owned: If the corporation pays the premium on an employee-owned policy, the premium would be:
  • Included in the employee's income as an employee benefit
  • Deductible to the employer as a business expense
Any cash benefit paid to an employee would be non-taxable*
Corporate Owned:
Corporate Payee:
1. If the corporation pays the premium on a corporate-owned policy, the premium would not be:
  • Included in the employee's income
  • Deductible to the corporation as a business expense.
  • The corporation would deduct the cash benefit paid to the employee (funded by the non-taxable* receipt of proceeds by the corporation under the policy)
  • The cash benefit would be included in the employee's income as an employee benefit.
    2. If the corporation pays the premium on corporate owned policy and designates an employee as a beneficiary (Province of Quebec) or executes a Direction to Pay (outside the Province of Quebec) the premium would be:
    • Included in the employee's income as an employee benefit
    • Deductible to the employer as a business expense.
Any cash benefit paid to an employee would be non-taxable*

A direction to Pay is simply a written request from the policy owner to the insurer, asking the insurer to pay proceeds to a third party.
Unlike a Beneficiary Designation, a Direction to Pay never provides creditor-protection.
A Direction to Pay cannot be used in relation to a Return of Premium on Death benefit (ROPD). The ROPD Benefit will only be paid to the owner's estate. Caution should be used in making a Direction to Pay or Beneficiary Designation (in Quebec) as the directee / beneficiary will receive the cash benefit under the policy regardless of the severity of the owner/insured's illness.
  • Sharing ownership of a policy by having the corporation own and pay for part of the policy, and the employee or shareholder the other part, should be examined carefully to determine if it would result in a taxable benefit to the employee or shareholder.