1. Do you have life insurance you own personally?
  2. Does your private corporation need life insurance on you (e.g., for a buy/sell agreement or key person insurance)?

If both apply, consider transferring your life insurance to your corporation instead of having your corporation by new insurance and you then cancelling your personal insurance.

There are tax benefits too:

  • if your corporation pays a lower tax rate because premiums are generally paid with after-tax dollars
  • transferring your life insurance has the effect of converting retained earnings to you tax-free
  • converting taxable retained earnings into tax-free capital dividends upon death

The Ideal Life Insurance To Transfer

Convertible term life and Term To 100 life insurance are often ideal plans to transfer because they rarely have a Cash Surrender Value. Whole life and universal life can also be used but may result in a taxable gain to you if the Cash Surrender Value exceeds the Adjusted Cost Basis.


Get an independent actuarial Fair Market Value of your life insurance policy. Estimates are usually free.