In a word yes. It might be easier to think of the Corporation as a separate tax paying entity. There are a number of reasons when the corporation would need or be justified in purchasing life insurance. They include: key person, buy-sell agreements, executive retention. The company would suffer an economic loss and it is prudent for the company to own life insurance.
The ethical question has to due with intent. In Canada, if an individual;is getting a benefit and the company is not getting value from the purchase of a life insurance policy there are issues. May or may not be ethical, but it probably will be a taxable benefit to the individual.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
That's a great question! I'm sure we'd all agree that we expect all businesses to operate ethically, and with the best of intentions. So I guess your question comes down to one of two things - is life insurance a scam? Or does the life insurance my company supplies as a part of my benefits package need to be there? In either case, the answer is that life insurance is a blessing. It is a certainty that you will die. Tough, but true. If your employer provides life insurance for you, and you've opted to take it and die while employed, that benefit can be a big help in paying for your funeral and providing for those you've left behind. That is true for the independent policy that you hopefully purchased from a reputable, well respected insurance company. ( And went over thoroughly with an agent that you trust.) Are there fly by night or poorly managed companies out there that may skirt the edges of ethical integrity? I'd like to believe not, but there seems to be a bad apple in every bunch, so it is well for you to look into any company and agency before signing anything. And put stock into the old saying "if it sounds too good to be true, it probably is"...That said, I am sure that the number of ethical agencies far far outweighs the bad ones. Hope that helps! Any questions, please hit the contact me link, I'm happy to help. Thanks for asking!
The simple answer is "Yes!" Corporate Owned Life Insurance (COLI) is ethical. However, in recent years, because of some of the abuses, it has become more scrutinized in its uses. There are many valid reasons for using COLI. It could be very important to a company if a key person in their company died. In some cases, it would take months or years to replace that person with a specific skill set; so COLI maybe purchased to offset the loss. It may also be used as "golden handcuffs", where the life insurance builds cash value for a future date to pay executive retirement beyond a 401k. This can be done formally, through legal documents (the IRS even identifies it by code number much like "401k"). The unethical part came into play when companies purchased life insurance of people where they had no insurable interest (in other words would not be at risk of significant loss by the death of the person insured under the policy). For example, Company Z purchased COLI on all of its 22,000 employees - from executives done to the maintenance. When a rank-in-file employee died, Company Z kept the death benefit, giving them a tax free benefit. The courts decided that Company Z did not have an insurable interest and required them to pay the family the death benefit. The policy was clearly determined not to be COLI but to be STOLI (Stranger Owned Life Insurance).
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
A corporation operates as a “person” and as such can buy life insurance. They can only buy life insurance on someone with whom they have an insurable interest. They cannot select someone at random, purchase insurance on them and then hope that they die soon. A corporation would suffer a loss if a key person were to die prematurely. The corporation may have other obligations such as buying back the shares of a deceased shareholder. There are many reasons that a corporation can and should purchase life insurance.
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The ethical question has to due with intent. In Canada, if an individual;is getting a benefit and the company is not getting value from the purchase of a life insurance policy there are issues. May or may not be ethical, but it probably will be a taxable benefit to the individual.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.