How Does Split Dollar Critical Illness Insurance Work?

There are some key clauses in this type of insurance policy that determine how it operates. Namely, it states that the corporation owns and funds the critical illness coverage, as well as, being the beneficiary of it. The shareholder will own and fund the Return of Premium option until the policy is terminated.

One of the key advantages of Split Dollar Critical Illness insurance is that even though there is no cash value associated with the policy, in many cases, a 100% return of premium (ROP) can be paid back upon the death of the insured individual or upon policy surrender or termination. Provided that no claims have been made. This makes this type of arrangement particularly attractive for many businesses.

By having critical illness insurance for key employees, you don’t have the added stress of weighing what’s best for your business versus what’s best for your recovery. Critical illness insurance can be used to help support the costs of your recovery so you can maintain your commitment to your business and your future.

You can use the money to:

• Supplement your income due to time away from work while you recover

• Cover debt repayment obligations, salary for key employees or other fixed operating expenses

• Cover the cost of medications, medical devices and treatment not covered by provincial health plans and other benefit plans

• Access private or out-of-country medical treatment

• Bring in additional help at home for you and your family

• Cover travel costs to get to treatment facilities (gas, hotel, meals, parking)

These tax-free funds can be used any way you wish. Perhaps you may need to hire a temporary Manager to help run the business in your absence or cover some of the monthly expenses such as equipment loans and leases. One of the best features of critical illness insurance is that the payout is not affected by your ability to work – you have the choice to work as much or as little as you want.

Is Critical Illness Insurance expensive?

Consider the risk. Your odds of winning the 6/49 lottery is roughly 1 in 14 million! Did you know that if you are over 40, the chances of developing coronary heart disease in your lifetime are 1 in 2 if you are a man and 1 in 3 if you are a woman? The odds of developing a cancer for either sex are also 1 in 3. Once you are over the age 50 and up to age 75 there is a greater chance of having a critical illness than dying and the majority of this group will recover. For a business owner at age 43, the monthly premiums for a $100,000 Critical Illness policy could be as low as $60 a month. What’s better is there likely is a way in which this person’s company can pay for the premiums while still having the benefit paid out tax-free. The business owner may even consider purchasing a policy which would return all the premiums paid in the event a claim never occurs. If you suffer a serious illness, why would you want to use your money to cover your business and medical expenses? Use the insurance company’s money instead! Perhaps it is time to consider how well your family and your business could cope financially if you suffered a serious illness or injury. Life insurance provides financial protection if you die. Who provides financial protection if you suffer something serious and live? It’s clear that critical illness insurance for small business owners is a very important and smart investment.