Professional corporations and BCMA insurance FAQ

Here are some commonly asked questions regarding premium payments of life insurance and other policies offered through the BCMA.

What are the benefits to having my BCMA term life insurance corporately paid versus personally paid?
There are many factors to consider when deciding whether to pay your life insurance premiums corporately or personally. The main advantage to having your corporation pay premiums is the tax savings. 

Let’s take an example of a $1000 annual life premium and assume a 14% business tax rate and 40% personal marginal tax rate. Your corporation would have to earn $1163 and pay 14% business tax to net the $1000 required to pay the insurer. To pay the premium personally, your corporation would have to earn $1667, pay this amount to you in salary, which is tax­ed to you personally at 40%, to net $1000. This example shows a tax savings of $504 per year by paying premiums corporately. 

Aside from tax savings however, you should consider several factors before deciding how best to pay premiums. For corporately paid premiums, your corporation must be the policy beneficiary, and depending on your corporate ownership structure and the terms of your will, your beneficiaries may not be able to access the funds immediately. 

A personal policy can name an individual as beneficiary and a typical death claim can be paid within 9 business days of the insurer receiving the necessary paperwork. Note that life policies with cash values have different considerations than term policies. Other factors to consider include transfer of ownership and creditor protection. We always recommend that you let your accountant determine the most effective method of paying premiums.

Can a professional corporation own my BCMA life insurance policy?
The life insurance policy underwritten by Sun Life Financial stipulates that no assignment of coverage under the policy may be made by the BCMA. Only you, as a member (or your spouse), can apply for coverage and own the certificate of insurance under the BCMA life insurance plan. However, as an owner, you may seek advice from your accountant/legal advisor and choose to assign your rights and interests elsewhere with respect to the policy. While the BCMA cannot as­sume responsibility for the validity or effect of your assignment, your assign­ment must be filed in writing to the BCMA in order to ensure that it is binding.

Can a professional corporation be named as a beneficiary?
Yes. However, you should confer with your accountant/financial advisor to determine if there are any advantages to naming your professional corporation as the beneficiary of your insurance. 

Can a professional corporation pay for my life insurance premium?
Yes. However, the premiums paid would be a taxable benefit to you personally. Premiums would not be a tax-deductible expense to your corporation. Furthermore, regardless of who actually pays the premium, any premium refund will be paid only to you, the member. 

Can a professional corporation own my disability coverage(s)?
Physicians’ disability insurance and BCMA disability income insurance coverage may not be assigned. Only you, the member, may apply for the coverage and you cannot transfer ownership. 

Can a professional corporation pay for my critical illness insurance premium?
Yes. However, the premiums paid would be a taxable benefit to you. Premiums are not a tax-deductible ex­pense to your corporation.

Can a professional corporation pay for my disability insurance premium? 
While your professional corporation could pay the premium for your disability income insurance, unless you can show that the full premium was added to your income as a taxable benefit, any benefits paid in the event of a disability would be fully taxable as income. To ensure disability income benefits when received are tax free, all premiums should be paid by you personally. Physicians’ disability insurance is a government-funded benefit, and therefore a premium is not charg­ed; however, the premiums paid on your behalf are a taxable benefit to you.

Can a professional corporation own my BCMA office overhead coverage?
Office overhead is not assignable. Only you, the member, may apply for coverage and you cannot transfer ownership. 

Can a professional corporation pay for my office overhead premium?
Since office overhead benefits are taxable, and the premiums paid are tax deductible, you may prefer to have your professional corporation pay your premiums. 

Can a professional corporation own my BCMA critical illness insurance policy?
Critical illness coverage is not assignable. Only you, as a member (or your spouse), may apply for coverage and you cannot transfer ownership. 

Consult your lawyer or accountant with any questions about professional corporations. The information provided in this article is not intended to be construed as legal or financial advice. 

For a review of your insurance, please contact our licensed, noncommissioned insurance advisors at 1 800 665-2262 or BCMAInsurance@bcma.bc.ca.
—Sinden Luciuk
Manager, Insurance