Table of Contents:
About This Insurance
Good health can provide a solid foundation for the future. However, being diagnosed with a critical illness could dramatically impact your quality of life, future plans, and financial well-being. Critical illnesses refer to conditions that may require long-term—and in some cases, lifelong—specialized care and treatment. These types of illnesses can affect anyone regardless of age, gender, health or socioeconomic status and place a significant burden not only physically, but also mentally, socially, and financially on both the individual and their family. Some of the most common critical illnesses include:
- Cancers and tumors, such as life-threatening malignant tumors and brain tumors
- Cardiovascular diseases, including aortic surgery, coronary artery bypass surgery, heart attack, heart valve replacement or repair, and stroke
- Neurological disorders, such as bacterial meningitis, dementia (e.g., Alzheimer’s), motor neuron disease, multiple sclerosis (MS), and Parkinson’s disease
- Vital organ disorders, including kidney failure and being placed on the waiting list for major organ transplants
- Severe and debilitating injuries, such as traumatic brain injury, coma, blindness, deafness, limb loss, loss of speech, paralysis, and extensive burns
- Illnesses requiring long-term care, such as aplastic anemia and HIV infection
Although some of the treatment costs for critical illnesses may be covered through the public healthcare system or government programs, these supports are usually not sufficient. In many cases, patients are required to personally cover a significant portion of the expenses related to treatment, medication, home care, or rehabilitation. In such situations, having a critical illness insurance becomes an essential tool for managing the crisis, maintaining quality of life, and reducing psychological stress during the illness.
Although it is primarily intended to be purchased before the onset of any covered condition, it may still be available after diagnosis under certain circumstances—based on a thorough review of a completed medical questionnaire in case of a Pre-existing conditions.
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Executive Health Plan (EHP)
A Business Solution for Critical Illness Protection
The Executive Health Plan is designed to protect your business finances in case a key person suffers a serious illness.
Key Benefits:
- Business protection through critical illness coverage for a key person (often the primary shareholder).
- Death benefit to the company if the insured passes away.
- Health benefit payout to the insured (tax-free) if they remain healthy and the coverage is no longer needed.
- Shared ownership between the corporation and the insured, with premiums split according to interest in the plan.
Additional Advantage:
If the insured remains healthy until retirement or departure, the plan allows them to receive a substantial health benefit — a powerful incentive to retain and reward key personnel.
Executive Health Plan (EHP) – Critical Illness Coverage for Business Owners
The Executive Health Plan (EHP) allows business owners who have incorporated companies in Canada to jointly own a critical illness insurance policy with their corporation. Both the company and the insured individuals share in the financial benefits and tax obligations. Premiums are allocated based on the terms outlined in the insurance policy. It is important to consider the following points in this regard:
- If shareholders (partners) or employees of the company are diagnosed with a critical illness, the corporation receives the critical illness benefit amount and in the event of death, the corporation receives the death benefit.
- If shareholders (partners) or employees are not diagnosed with a critical illness, the insurance benefits are paid to the shareholders (partners) and/or employees, and If you remain healthy, you and your business can recover up to 100% of the premiums paid.
- If the shareholders (partners) or employees remain healthy, there is the option to change ownership of the policy and beneficiaries.
The EHP concept works with either an Opco (operating company) or a Holdco (holding company). If there’s just a Holdco, it may be hard to justify the need for a critical illness insurance.
Joint Ownership with Operating Company (Opco)
- Quick access to critical illness and death benefits to address the insurance needs of the operating company, as identified in the Business Needs Analysis.
- A clear procedure must be in place in case of a critical illness or death, allowing the Opco to access the benefits and meet its insurance requirements.
- If the critical illness or death benefit is paid to the Opco, the amount will be exposed to the company’s creditors.
- In addition to the shared ownership insurance agreement, if there is more than one shareholder, a shareholder agreement should be completed to ensure the benefits of the plan are used as originally intended.
Joint Ownership with Holding Company (Holdco)
- If the critical illness or death benefit is paid to the Holdco, the amount will be protected from the creditors of the Opco.
- Since you control the Holdco, you alone decide how and when the benefits will be made available to the Opco.
- If you are a key employee but not a shareholder, you should assess your personal life and critical illness insurance needs separately, as the benefits under this plan will be paid to the company, not to the individual.
Shortly, if you only own shares in an Opco or are a key employee who is not a shareholder, then the Health Priorities – Business policy will be held jointly by you and the Opco. If you own shares in a Holdco and there’s also an Opco, it’s more complicated, because you need to determine whether it’s more beneficial to own the Health Priorities – Business policy jointly with the Opco or the Holdco.
FAQ
Can my company deduct Health Priorities – Business premiums for tax
purposes?
No, it can’t. According to the Canada Revenue Agency (CRA), the critical illness premiums paid by your company are not deductible for tax purposes because they aren’t incurred to gain or produce income from a business or a property.
