As we mentioned in previous articles, it is important that people own a business understand what is business insurance, so they can protect their business in case of any unforeseen event happened causing hardship to the business owner and their family such as business store burned down one day, if you don't carry insurance, you would endured some hard times after that.
You make sure you have insurance for anything of importance, or anything that could prevent me from earning a living.
In this article we will discuss the important role of key person life insurance purchased by the company will warrant the long term stability of company's operation and success.
A key person is one who is recognized as being essential to business success and whose death would result in substantial loss to the company.
The key person may be insured 1.
to the value of 1 or 2 years income 2.
the amount could represent the financial loss to the business.
Here are some characteristics of key person insurance: 1.
the premiums paid are not a tax deductible expense.
2.
the premiums are not a taxable benefit to the life insured.
3.
dividends are not considered to be taxable income, until they exceed the ACB of the policy.
4.
annual Cash Surrender Value increases are not considered as taxable income.
5.
the death benefit is non-taxable when received.
6.
private corporations would have the share value increased by the corporate owned (key person) insurance.
Proceeds (less the return of premium) are added to the Capital Dividend Account.
I hope this information will help.
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