Split Dollar Critical Illness
Split-dollar critical illness insurance is a strategy where a corporation and key employee/shareholder enter a legal agreement to purchase a critical illness insurance policy.
The split dollar arrangement is a formal legal agreement between the parties that addresses:
- Allocation of premium costs
- Ownership interest
- Share of rights and benefits
Who Can Benefit From Split Dollar Critical Illness Insurance?
This strategy can be potentially suitable for corporations and key employees/shareholders who:
- Require critical illness protection
- Looking to split the cost of benefits of a critical illness policy:
- Base critical illness coverage
- Return of premium rider
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.
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.
It’s worth noting that many employees of a working age suffer a critical illness. This can severely impact their ability to work and can have a significant effect on the business that they work for. This financial strategy is an effective way to safeguard organizations against this very real financial risk.
Don’t hesitate to contact our professional advisors if you feel that Split Dollar Critical Illness insurance is an arrangement that could benefit you or your organization. We will work with you to source the best possible solution for your individual needs.
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Our team in Nanaimo has acquired decades of experience specializing in providing quality financial advice in areas of financial planning, investments and insurance. Book a meeting with us to learn how we can help you with your finances.