knowledge topics
Insurance for Corporations
KNOWLEDGE EXPECTED OF: CFP® Professionals Only
- Identify the types of insurance that may be owned by a business, such as:
- Life insurance
- Disability insurance
- Critical illness insurance
- Business interruption insurance (i.e. overhead insurance)
- Explain how each of the factors may impact the suitability of holding insurance within a business, such as:
- Purpose / intended use of insurance
- Tax impact
- Intended beneficiaries of insurance
- Existing legal agreements
- Age of insured
- Health of insured
- Evaluate how each of the factors may impact the suitability of holding insurance within a business.
- Explain advantages and disadvantages of corporate-owned insurance.
- Explain how the proceeds of corporate-owned life insurance may be used by a business.
- To pay expenses
- To pay debts
- To pay costs related to replacing key person (i.e. talent acquisition, training, remuneration)
- Establish reserve to offset drop in revenues
- To pay tax-free dividend to shareholders
- To redeem shares upon the death of a shareholder
- Explain the tax impact of corporate-owned life and disability insurance.
- When premiums are paid by the business
- When premiums are paid by the individual
- When benefits are received by the business
- When benefits are received by the individual’s estate or their beneficiary
- Explain how each factor may impact the decision to hold insurance in a corporation, such as:
- Purpose of the insurance
- Proposed use of cash surrender value and death benefit (for life insurance)
- Difference in personal and corporate tax rates
- Creditor protection needs and concerns for individual and business
- Ages of parties to be insured
- Availability of, and plans to use, capital gains exemption
- Evaluate how each factor may impact the decision to hold insurance in a corporation.
- Explain who may qualify as a key person to a business.
- Explain the purpose of key person insurance.
- Key person life insurance
- Key person disability insurance
- Explain how insurance may be used to fund a buy-sell agreement.
- Identify the concept of a split dollar insurance policy.
Glossary of Verbs (mouse over to see definition)
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Define
To state exactly the meaning of
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Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
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Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
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Compare
To note the similarities and differences between two or more things
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Estimate
To determine an approximate value for
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Calculate
To find the value using mathematics
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Convert
To change from one form or purpose to another
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Evaluate
To reach a conclusion or make a judgement through careful study
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Interpret
To give the meaning of / to construe or understand / to translate orally
Read more about the Taxonomy used in the FP-BoK