Corporate Whole Life Insurance in British Columbia: A Complete Guide for Business Owners
Running a business in British Columbia comes with unique financial challenges and opportunities. As a business owner, you're constantly balancing growth objectives with risk management, and corporate whole life insurance policies offer a powerful solution that addresses both. Unlike personal coverage, these policies create tax-advantaged wealth accumulation, succession planning tools, and creditor protection—all while securing your company's financial future.
British Columbia's business landscape includes everything from thriving tech startups in Vancouver to established manufacturing operations in the Fraser Valley. Regardless of your industry, corporate whole life insurance policies can transform how your company builds and preserves wealth. This guide explores how BC business owners leverage these policies for maximum financial benefit, the unique provincial considerations that affect your coverage, and the strategic advantages that make this approach essential for long-term success.
Key Takeaways
Corporate whole life insurance policies provide permanent coverage owned by your corporation with guaranteed cash value growth and death benefits
Tax-advantaged wealth accumulation through your corporation allows investment growth within the policy without immediate taxation
Capital Dividend Account (CDA) enables tax-free distribution of death benefits to shareholders, creating efficient estate planning
Cash value serves as corporate asset for business borrowing, key person protection, and succession planning
BC business owners benefit from creditor protection and flexible wealth transfer strategies unavailable with personal policies
Overview
This comprehensive guide examines corporate whole life insurance policies specifically for British Columbia business owners. You'll discover how these policies function as both protection and investment vehicles, why they offer superior tax treatment compared to other corporate assets, and how to structure coverage that aligns with your business objectives.
We'll explore the four guaranteed values within your policy, compare corporate versus personal ownership advantages, and provide real-world examples of BC companies using this strategy effectively. The FAQ section addresses common questions about costs, taxation, and implementation, while our team at Athena Financial Inc. offers personalized guidance for your specific business situation throughout British Columbia.
Understanding Corporate Whole Life Insurance Policies
Corporate whole life insurance policies are permanent life insurance contracts owned and funded by your corporation rather than personally. The corporation pays premiums, owns the cash value, and receives the death benefit. This ownership structure creates distinct tax advantages and financial planning opportunities unavailable with personal coverage.
These policies provide four guaranteed components: death benefit, cash surrender value, policy loan value, and paid-up insurance amount. Each element grows predictably, creating a stable foundation for corporate financial planning. The cash value accumulates tax-deferred within the policy, growing without immediate corporate taxation on investment gains.
British Columbia business owners typically implement these policies for multiple purposes simultaneously. A manufacturing company might secure key person coverage while building retirement assets. A professional corporation could create succession funding while protecting shareholder value. The versatility makes corporate whole life insurance policies adaptable to virtually any business structure operating in BC.
How Corporate Ownership Changes Everything
When your corporation owns the policy, premiums are paid with after-tax corporate dollars. However, the investment growth within the policy accumulates tax-deferred, similar to how registered investment accounts shelter growth from immediate taxation. This creates significant long-term advantages compared to holding investments in your corporation directly.
The death benefit receives special treatment through the Capital Dividend Account (CDA). When the insured passes away, the death benefit minus the policy's adjusted cost basis flows into your corporation's CDA. This account allows your corporation to pay tax-free dividends to shareholders, effectively converting life insurance proceeds into tax-free wealth transfer.
Tax Advantages of Corporate Whole Life Insurance Policies
The tax treatment of corporate whole life insurance policies creates compelling advantages for BC business owners. Understanding these benefits helps you maximize the value of your coverage strategy.
Capital Dividend Account Benefits
The CDA represents one of the most powerful tax planning tools available to Canadian corporations. When your corporation receives a death benefit, the amount exceeding the policy's adjusted cost basis (ACB) credits to your CDA. Your corporation can then distribute this amount to shareholders as tax-free capital dividends.
For example, if your BC corporation holds a $2 million policy with a $200,000 ACB, the death benefit creates a $1.8 million CDA credit. Your estate receives this amount completely tax-free, unlike most corporate assets that face taxation before distribution. This treatment makes life insurance one of the most tax-efficient assets your corporation can hold.
The CDA strategy works particularly well for business succession planning, allowing you to transfer significant wealth to heirs without the tax burden associated with other corporate assets. British Columbia's high property values and business valuations make this efficiency especially valuable for estate planning.
Tax-Deferred Growth on Cash Value
Corporate investment accounts face immediate taxation on interest, dividends, and capital gains. Corporate whole life insurance policies shelter investment growth from this taxation during accumulation. The cash value grows based on the insurer's dividend declarations (for participating policies) or guaranteed interest rates, without triggering annual tax obligations.
This tax deferral compounds over decades, creating significantly more wealth than comparable taxable investments. A BC technology company holding $100,000 annually in corporate investments might see substantial value erosion from taxes. That same amount directed toward policy premiums grows tax-sheltered, with the full value available for corporate use.
When you eventually access the cash value through policy loans, these loans aren't taxable events. Your corporation borrows against the death benefit rather than withdrawing cash value, maintaining the tax-advantaged status. This creates remarkable flexibility for accessing corporate wealth without triggering immediate taxation.
Passive Income Considerations
British Columbia corporations must monitor passive investment income due to small business deduction limitations. However, corporate whole life insurance policies receive favorable treatment. The cash value growth doesn't count as passive income for these calculations, protecting your corporation's small business deduction eligibility.
This distinction matters significantly for BC professional corporations and Canadian-controlled private corporations (CCPCs). While dividend income or interest from corporate investments reduces your small business deduction, properly structured life insurance doesn't create the same limitation. Your corporation maintains full access to lower tax rates on active business income.
The tax advantages extend beyond basic accumulation, creating a comprehensive wealth-building strategy that works within Canada's tax system rather than against it. BC business owners benefit from provincial tax rates that make corporate wealth accumulation particularly attractive when combined with life insurance's favorable treatment.
Strategic Uses for BC Business Owners
Corporate whole life insurance policies serve multiple strategic purposes for British Columbia business owners. Understanding these applications helps you determine whether this approach fits your specific situation.
Key Person Protection
Your company likely depends on specific individuals whose loss would create significant financial hardship. Key person coverage protects against this risk by providing capital to replace revenue, recruit replacements, or stabilize operations during transition periods.
A Vancouver consulting firm might insure its founding partners, ensuring the business maintains financial stability if either becomes disabled or passes away. The death benefit provides immediate capital without forcing asset sales or borrowing during vulnerable periods. The cash value serves as a corporate asset during the insured's lifetime, creating dual benefits.
Unlike traditional term disability coverage, whole life protection never expires and accumulates increasing value. Your key person coverage becomes more valuable over time rather than depleting. This makes it particularly effective for BC businesses planning decades ahead rather than just addressing immediate risks.
Buy-Sell Agreement Funding
Partnership agreements often include buyout provisions requiring purchase of a departing partner's shares. Without funding mechanisms, surviving partners face difficult choices: deplete corporate reserves, secure expensive financing, or bring in outside investors. Corporate whole life insurance policies solve this problem elegantly.
Cross-purchase or corporate redemption strategies funded by life insurance ensure immediate liquidity when needed. If one partner passes away, the death benefit provides exact funding to purchase their shares at pre-agreed valuations. The deceased partner's estate receives fair value, and surviving partners maintain control without financial strain.
British Columbia's diverse business sectors—from forestry operations to digital agencies—all benefit from this certainty. The business succession applications extend beyond death scenarios, with cash values supporting retirement buyouts or gradual ownership transitions as well.
Shareholder Benefit Programs
Corporate whole life insurance policies create attractive benefit packages that help BC companies recruit and retain top talent. Executive compensation often includes life insurance as a tax-efficient alternative to pure salary increases, particularly for key employees approaching retirement.
The corporation funds policies on executives' lives, providing death benefit protection while building cash value. These arrangements require careful tax planning, but when structured properly, they create significant value for both the business and the insured employee. The flexibility allows customization based on individual circumstances and corporate objectives.
Estate Equalization and Wealth Transfer
Many BC business owners face the challenge of transferring a business to some children while treating all heirs fairly. Corporate whole life insurance policies provide elegant solutions through estate equalization strategies.
Consider a family owning a successful Kelowna winery. One child operated the business while two others pursued different careers. Corporate life insurance on the parents allows the business to pass to the operating child, while death benefits equalize the estate by providing equivalent value to the other children. This preserves both family harmony and business continuity.
The tax-free dividend distribution through the CDA makes this particularly efficient. Unlike selling assets or forcing business liquidation, life insurance funding provides immediate liquidity without triggering capital gains or corporate taxes. British Columbia's strong real estate and business valuations make this strategy especially relevant for BC families.
The Four Guaranteed Values Explained
Every corporate whole life insurance policy provides four distinct guaranteed values that create financial flexibility and security. Understanding these components helps you maximize your policy's strategic value.
Guaranteed Death Benefit
The death benefit represents the primary insurance protection—the amount your corporation receives when the insured passes away. This value is guaranteed from policy inception and typically increases over time through participating policy dividends or guaranteed growth schedules.
For corporate policies, the death benefit serves multiple purposes beyond basic protection. It funds buy-sell agreements, provides estate liquidity, and creates CDA credits for tax-free distributions. The guaranteed nature means your corporation can plan decades ahead with confidence in the benefit amount.
British Columbia business owners often structure death benefits to match specific planning needs: business valuations for succession, estate tax obligations, or wealth equalization targets. The certainty allows precise planning unavailable with fluctuating asset values or investment accounts.
Cash Surrender Value
Cash surrender value represents the amount your corporation receives if you cancel the policy. This value starts low but grows steadily over time, eventually exceeding total premiums paid. The guaranteed growth schedule shows exactly how this value increases, removing uncertainty from corporate planning.
Most BC business owners view cash surrender value as a corporate asset rather than an amount they'll actually surrender. The value appears on your corporate balance sheet, enhancing financial strength and borrowing capacity. Banks and creditors recognize this asset when evaluating your corporation's financial position.
The growth isn't subject to market volatility like stocks or segregated funds. Your cash value increases predictably based on the policy schedule, creating stable wealth accumulation even during economic downturns affecting British Columbia's resource-dependent economy.
Policy Loan Value
Policy loan value indicates how much your corporation can borrow against the death benefit. Most insurers allow borrowing up to 90% of cash surrender value, with the exact amount increasing as the policy matures. These loans carry interest charges but don't require qualification or approval beyond policy ownership.
Corporate policy loans provide remarkable financial flexibility. Your BC company can access capital for expansion, equipment purchases, or temporary cash flow needs without liquidating investments or triggering taxable events. The loan reduces the death benefit dollar-for-dollar, but the remaining coverage and cash value continue growing.
Interest rates on policy loans typically track investment-grade bond rates, making them competitive with bank borrowing. Unlike traditional loans, your corporation faces no repayment schedule or qualifying criteria. You can repay loans when convenient or allow them to reduce the death benefit at death. This flexibility makes policy loans particularly valuable during uncertain economic periods.
Paid-Up Insurance Amount
The paid-up insurance value shows how much permanent coverage your policy would provide if you stopped paying premiums. This guarantee protects against situations where premium payments become difficult or impossible. Rather than losing all coverage, your corporation maintains permanent protection based on premiums paid to date.
For BC business owners, this value provides reassurance during economic downturns or business challenges. If cash flow becomes strained, you're not forced to surrender valuable coverage. The paid-up amount ensures your corporation retains permanent protection, though at a reduced benefit level compared to continuing full premiums.
Corporate Versus Personal Ownership
Choosing between corporate and personal ownership of corporate whole life insurance policies significantly impacts your financial outcomes. BC business owners should understand these differences before implementing coverage.
Premium Payment Considerations
Corporate premiums are paid with after-tax corporate dollars, typically taxed at small business rates (11-12% in BC for the first $500,000 of active business income). Personal premiums require paying yourself salary or dividends, facing personal tax rates that may exceed 50% at higher income levels.
For high-income BC professionals and business owners, the corporate tax savings create immediate advantages. Your company pays $10,000 in premiums using approximately $11,200 of pre-tax income. Personally, that same $10,000 premium might require $18,000-$20,000 in pre-tax earnings, depending on your marginal rate.
These savings compound over decades of premium payments. A Vancouver dentist funding $50,000 annually through their corporation saves substantial amounts compared to personal funding. These savings enhance the overall return on your life insurance investment significantly.
Access and Control Differences
Corporate ownership means your business controls the policy, not you personally. This affects how you access cash values, who receives death benefits, and how the policy integrates with your overall estate plan. Corporate policies support business objectives primarily, though they create personal benefits indirectly.
Personal policies provide direct control and simpler beneficiary designations. The death benefit passes directly to named beneficiaries outside your estate, avoiding probate and potential creditor claims. Corporate policies flow through your corporation, requiring dividend distribution to access proceeds personally.
For most BC business owners, corporate ownership advantages outweigh control considerations. The tax benefits and strategic flexibility make corporate ownership compelling, especially when combined with comprehensive estate planning that addresses the corporate-to-personal transition.
Creditor Protection Benefits
British Columbia business owners face liability risks from operations, contracts, and professional responsibilities. Corporate whole life insurance policies provide enhanced creditor protection compared to many other corporate assets, though this protection isn't absolute.
Cash value within life insurance policies generally receives favorable treatment in creditor situations compared to investment accounts or retained earnings. While not fully exempt from creditor claims, insurance policies typically enjoy stronger protection than general corporate assets. This makes them attractive for BC businesses in higher-risk industries.
The protection extends to personal guarantees on corporate debt in many situations. If you've personally guaranteed corporate obligations, properly structured insurance arrangements may shelter some wealth from these claims. However, BC business owners should consult legal professionals about specific creditor protection strategies rather than relying solely on insurance for asset protection.
Comparing Corporate Whole Life to Other Strategies
BC business owners have numerous options for corporate wealth accumulation and protection. Understanding how corporate whole life insurance policies compare to alternatives helps you make informed decisions.
Corporate Whole Life Versus Term Insurance
Term insurance provides pure death benefit protection without cash value accumulation. Premiums start lower but increase dramatically at renewal, and coverage eventually becomes prohibitively expensive or unavailable. Term works well for temporary needs like mortgage protection or short-term key person coverage.
Whole life provides permanent coverage with level premiums and guaranteed cash value growth. While initially more expensive, the long-term value and flexibility make whole life superior for most corporate planning situations. BC business owners implementing succession plans, executive benefits, or wealth accumulation strategies typically require the permanence and cash value that only whole life provides.
A Victoria software company might use term insurance for a 10-year partnership agreement but implement corporate whole life insurance policies for founders approaching retirement. The combination addresses immediate needs affordably while building long-term value through permanent coverage.
Whole Life Versus Investment Accounts
Corporate investment accounts offer unlimited contribution room and complete liquidity but face immediate taxation on all investment income. Interest, dividends, and capital gains trigger corporate taxes annually, reducing accumulation efficiency. High passive income also jeopardizes your corporation's small business deduction.
Corporate whole life insurance policies shelter growth from immediate taxation, maintain small business deduction eligibility, and create CDA credits for tax-free distributions. The guaranteed growth removes market volatility, providing stability unavailable with equity investments. For conservative corporate wealth accumulation, whole life often outperforms taxable investments after considering all tax effects.
British Columbia's economy experiences cyclical volatility due to resource sector exposure and real estate fluctuations. The guaranteed nature of corporate whole life insurance policies provides portfolio stability that many BC business owners value highly, especially when balanced against more aggressive investment strategies in other corporate holdings.
Whole Life Versus Segregated Funds
Segregated funds combine investment growth with insurance guarantees, offering creditor protection and probate bypass benefits. These products work well for certain planning situations but lack the tax-deferred cash value accumulation and CDA benefits of whole life insurance.
Segregated funds face taxation on distributions like mutual funds, reducing net returns compared to the tax-sheltered growth within corporate whole life insurance policies. The guarantee costs (insurance fees) also reduce investment returns, sometimes significantly. For pure corporate wealth accumulation with optimal tax treatment, whole life typically provides superior long-term results.
However, segregated funds offer more aggressive growth potential through equity exposure. BC business owners often implement both strategies: whole life for guaranteed, tax-efficient accumulation and segregated funds for growth-oriented investing with insurance benefits. The combination creates diversified corporate holdings addressing multiple objectives.
Cost Analysis and Return Expectations
Understanding the financial commitment and expected returns helps BC business owners evaluate whether corporate whole life insurance policies fit their corporate strategy.
Premium Structures and Funding Options
Whole life premiums are higher than term insurance but remain level for life. Your corporation commits to decades of payments, though most policies offer flexibility through paid-up additions or reduced paid-up options if circumstances change.
Annual premiums typically range from $5,000 to $100,000+ depending on coverage amount, insured's age, and health status. A 45-year-old BC business owner might pay $15,000 annually for $1 million in coverage. That same coverage might cost $30,000+ annually if purchased at age 60, highlighting the value of implementing coverage earlier.
Some BC business owners fund policies aggressively in early years through limited pay options (10-pay or 20-pay policies). These accelerated funding strategies build cash value faster and eliminate premium obligations sooner, creating fully paid-up coverage while the business generates strong cash flow. The approach works well for BC companies in cyclical industries wanting to complete funding during profitable periods.
Internal Rate of Return Considerations
Corporate whole life insurance policies generate returns through multiple mechanisms: tax-deferred cash value growth, tax-free death benefit, and CDA advantages. Properly evaluating returns requires considering all components rather than focusing solely on cash value accumulation.
Early years typically show negative returns as initial premiums cover insurance costs and commissions. However, by years 15-20, cash values begin exceeding premiums paid, and the internal rate of return turns positive. By policy maturity, many whole life policies generate returns comparable to conservative fixed-income investments, but with superior tax treatment.
The death benefit return depends entirely on when death occurs. Earlier death provides extraordinary returns, while death in later years after substantial premium payments yields more modest returns. BC business owners should view the death benefit as protection rather than an investment return, with the cash value accumulation providing the investment component.
Break-Even Analysis for BC Business Owners
Most corporate whole life insurance policies require 10-15 years before cash surrender values equal total premiums paid. This break-even period represents your minimum commitment horizon. BC business owners should implement these policies with long-term intentions rather than short-term planning.
After break-even, cash values exceed premiums increasingly each year, while the death benefit continues growing. A policy funded for 20 years might show cash values 150% of premiums paid, with death benefits 300-500% of premiums paid. These relationships improve the longer you maintain coverage.
British Columbia's strong business environment and high income levels make the long-term commitment feasible for many business owners. The key is implementing coverage during profitable years when premium funding doesn't strain cash flow, allowing the policy to mature and deliver optimal value over decades.
Implementation Strategies for BC Corporations
Successfully implementing corporate whole life insurance policies requires careful planning and professional guidance. These strategies help BC business owners maximize value while avoiding common pitfalls.
Choosing the Right Coverage Amount
Coverage amounts should align with specific planning objectives rather than arbitrary targets. For key person protection, many BC companies insure 3-5 times the key person's annual contribution to profits. Buy-sell agreements typically equal the business valuation or each owner's share value.
Estate planning coverage often matches the sum needed to equalize inheritances or pay final taxes. A BC manufacturing business worth $5 million with three children might implement $3-4 million in coverage on the founding partners. This provides funds to pass the business to one child while equalizing the estate through life insurance proceeds to the others.
Starting with adequate coverage proves important since increasing death benefits later requires medical underwriting and age-adjusted pricing. BC business owners should project needs 10-20 years forward, implementing sufficient coverage initially rather than incrementally adding inadequate amounts over time.
Structuring Ownership Properly
Most BC corporations own policies directly as corporate assets, but some situations benefit from holding companies or shareholder-specific arrangements. Professional advice helps determine optimal structures based on your specific circumstances, business structure, and estate planning objectives.
Cross-purchase arrangements where shareholders own policies on each other create different tax outcomes than corporate-owned policies. Neither approach is universally superior—the right structure depends on your situation. BC business owners should work with financial professionals experienced in corporate insurance planning to evaluate alternatives.
Working with Experienced Advisors
Corporate whole life insurance policies involve complex tax and legal considerations that require specialized expertise. Generic insurance agents often lack the sophisticated knowledge needed for corporate-owned policies, particularly regarding CDA mechanics, passive income rules, and shareholder benefit taxation.
British Columbia business owners should seek advisors with demonstrated experience in corporate-owned life insurance, ideally holding advanced financial planning designations. The initial planning investment pays dividends through optimized structure, appropriate coverage, and tax-efficient implementation that maximizes long-term value.
Provincial Considerations for British Columbia
British Columbia's regulatory environment and economic factors create specific considerations for corporate whole life insurance policies.
BC Insurance Regulations
British Columbia regulates insurance through the Financial Services Authority of British Columbia (FSABC). All insurance policies and advisors must comply with provincial regulations, which protect consumers and ensure professional standards. BC business owners should verify their advisor holds proper licensing before implementing coverage.
Provincial regulations also govern how insurance integrates with other financial products and estate planning tools. BC's framework generally aligns with federal tax treatment of insurance, but provincial estate administration, probate, and creditor protection rules create specific planning considerations. Understanding these nuances helps BC business owners maximize the value of their corporate insurance strategies.
Economic Factors Affecting BC Business Owners
British Columbia's economy relies heavily on real estate, natural resources, technology, and professional services. These sectors experience cyclical volatility that affects business income and planning capabilities. Corporate whole life insurance policies provide guaranteed growth that stabilizes corporate portfolios during economic downturns affecting BC's resource-dependent economy.
High BC real estate values create substantial estate values even for modest businesses. Many BC business owners hold commercial property worth millions, creating significant estate liquidity needs. Corporate life insurance provides efficient funding for these obligations without forcing property sales during unfavorable market conditions.
Vancouver and Victoria's high cost of living affects premium affordability for some BC business owners. However, the strong income levels in BC's major business centers generally support the premium commitments required for meaningful corporate insurance programs. The key is implementing coverage during profitable periods when premium funding integrates naturally with cash flow.
Whether you operate a Vancouver tech startup, Kelowna vineyard, or Victoria professional practice, reach out to Athena Financial Inc. at +1 604-618-7365. We serve business owners throughout Ontario and British Columbia, providing personalized guidance on corporate whole life insurance policies tailored to your specific situation. Our team understands BC's unique business environment and helps you implement coverage that builds wealth, protects assets, and creates lasting financial security for your corporation.
Conclusion
Corporate whole life insurance policies provide British Columbia business owners with powerful tools for wealth accumulation, business protection, and estate planning. The combination of guaranteed growth, tax-advantaged treatment, and flexible strategic applications makes these policies essential components of comprehensive corporate financial planning.
From Vancouver's bustling tech sector to the Okanagan's thriving wine industry, BC businesses benefit from the stability and tax efficiency that corporate-owned whole life insurance delivers. Whether you're protecting key personnel, funding succession agreements, building retirement assets, or equalizing estates, these policies adapt to your specific needs while providing guarantees unavailable with most other corporate strategies.
The key to success lies in implementing coverage with proper structure, adequate amounts, and clear strategic objectives. BC business owners who approach corporate whole life insurance policies as long-term wealth-building tools rather than simple insurance products maximize the substantial value these policies create over decades. Working with experienced advisors who understand both insurance and corporate taxation ensures your coverage delivers optimal results for your specific situation.
Take the next step in securing your BC corporation's financial future by exploring how corporate whole life insurance policies fit your business strategy. Connect with Athena Financial Inc. to discover personalized solutions that build wealth, protect assets, and create lasting security for your business throughout British Columbia.
FAQs
Q: How much do corporate whole life insurance policies typically cost for BC business owners?
A: Premiums vary significantly based on the insured's age, health status, and coverage amount. A healthy 45-year-old might pay $10,000-$20,000 annually for $1 million in coverage, while a 60-year-old pays $25,000-$40,000 for the same benefit. BC business owners should obtain personalized quotes based on their specific circumstances rather than relying on general estimates.
Q: Can my BC corporation deduct premiums as business expenses?
A: No, premiums for corporate whole life insurance policies are not tax-deductible business expenses. However, the tax-deferred cash value growth and CDA benefits create superior after-tax returns compared to deductible expenses like taxable investments. The overall tax treatment favors whole life despite the non-deductibility of premiums.
Q: What happens to corporate policies during business succession or sale?
A: Corporate policies can continue under new ownership, be transferred to the selling shareholder, or be surrendered with proceeds distributed. Many BC business succession plans specifically address existing insurance policies in the purchase agreement. The optimal approach depends on your specific situation and sale structure, requiring professional guidance to maximize value for both parties.
Q: How does corporate whole life insurance compare to participating whole life policies?
A: Most corporate whole life insurance policies are participating policies that pay dividends based on the insurer's financial performance. These dividends enhance cash value growth and death benefits beyond guaranteed minimums. Non-participating policies offer guaranteed values only without dividend enhancement. BC business owners typically prefer participating policies for the growth potential, though guarantees provide attractive certainty for conservative planners.
Q: How do corporate policy loans affect my corporation's financial statements?
A: Policy loans appear as corporate liabilities on your balance sheet, reducing net worth dollar-for-dollar. However, the corresponding policy cash value appears as an asset, maintaining overall corporate net worth. Interest expense on policy loans is generally not tax-deductible unless the loan funds income-producing investments. BC corporations should track policy loans carefully for accurate financial reporting.