The current edition of Ontario Dentist recently contained a short article on Critical Illness insurance (CI). The article refers to the Split Dollar CI strategy (i.e. using a combination of corporate and personal dollars to fund CI premiums) that I’ve been advocating for a several years.  read my perspective below on the article and on the approach.

In the March 2021 edition of the Ontario Dentist there’s a short article on Critical Illness insurance (CI). We agree with the author’s points and felt that one point was worth emphasizing.

She doesn’t call it “Shared Ownership” or “Split Dollar” as we typically do, but she describes the strategy we’ve been advocating for a few years. Notably, ever since the federal government made significant changes to small business taxation (especially for professional corporations), this concept has become popular for our incorporated clients.

As the article states, Critical Illness Insurance is an important coverage to add to your portfolio. The covered conditions are serious and life-changing and not that rare. And unlike when they happened to prior generations of Canadians, advances in modern medicine mean that many of the covered conditions are highly survivable. But not without financial consequences.

Using the Split Dollar approach, in addition to obtaining coverage against illnesses, you gain the ability to extract corporate dollars from your PC on a tax-free basis if you do not get sick. The significant tax advantages associated with this strategy make it a very worthwhile allocation of corporate dollars. You do have to pay some of the premiums personally (hence the terms “shared” and “split”) however the overwhelming majority of the premiums are paid using less-expensive corporate dollars.

As with most insurance strategies, it only works if you can medically qualify for the product. It’s important to know that CI is more difficult to obtain and more sensitive to family health than life insurance. It also gets more expensive as you age. So suffice it to say, there’s no time like the present. For unincorporated applicants, we can complete the medical underwriting now and implement a “base” CI policy that will eventually be converted into Split Dollar CI later in life without having to requalify.

Please get in touch if you are interested in investigating how this concept would apply in your situation.