Canadian individuals and private corporations often acquire life insurance policies to meet liquidity needs on death, as well as accumulate capital on a tax-advantaged basis during the lifetime of the insured. For example, personal needs include funding to pay taxes and other estate debts, to make estate equalization payments to beneficiaries, and to pay legacies and make charitable gifts on the death of the life insured. Corporate needs include funding for buy-sell obligations under shareholders’ agreements, to pay corporate or organizational debts, and to provide key person replacement capital. However, it may not be possible to acquire sufficient insurance from Canadian insurers to meet these needs, and filling this “insurance gap” is where a foreign life insurance (FLI) policy can be advantageous.
CALU would like to thank Diane Everett, LLB, TEP, CLU, FEA, Vice President, Planning Services, PPI Advisory, for authoring this Practice Note.