Key person insurance is coverage owned by the business on the life or health of an individual whose absence could create a significant financial loss. The benefit may help offset revenue disruption, recruitment costs, loan concerns, or other business expenses.

Insurance can provide the liquidity needed for surviving shareholders or the corporation to purchase the ownership interest of a deceased shareholder. The agreement and insurance structure should be reviewed together with legal and tax professionals.

Corporate ownership may be appropriate in some situations, but it depends on the purpose of the coverage, shareholder relationships, tax considerations, creditor concerns, and estate objectives. Ownership should be determined as part of a coordinated review.

Business overhead expense insurance is designed to reimburse eligible fixed business expenses during a qualifying disability. It generally protects the company’s operating expenses rather than replacing the owner's personal income.

The appropriate amount depends on the financial loss being protected. This may include business valuation, debt, replacement costs, operating expenses, family income needs, tax liabilities, or the value stated in a shareholder agreement.

The Capital Dividend Account is a notional corporate tax account. In certain circumstances, a portion of a life insurance death benefit received by a private corporation may increase this account, potentially allowing tax-free capital dividends to Canadian-resident shareholders. Professional tax advice is essential.

A review is generally appropriate whenever ownership, valuation, debt, key personnel, corporate structure, family circumstances, or succession plans change. Regular reviews help keep the strategy aligned with the business.