There is one place your retained earnings can grow without being taxed every year. It is a life insurance policy.
For owners with surplus cash in the corporation, an Insured Retirement Plan puts lightly-taxed dollars to work, grows them tax-sheltered, and can be accessed later through a bank loan, while still leaving a benefit for your family and estate.
It's a long-term strategy for profitable, established companies, not a short-term one. We'll tell you honestly whether it fits before you do anything.
Book a free intro callA tax-advantaged way for your corporation to build wealth
- Grows tax-sheltered within the Income Tax Act’s exempt limits
- Accessed in retirement through a bank loan, repaid from the death benefit
- Doubles as a life policy for your family and estate
- Not capped by RRSP or TFSA contribution room
A strategy, not a product. Suitability and any figures are confirmed in a personalized review, not on this page.
A Corporate Insured Retirement Plan uses corporate-owned permanent life insurance to hold retained earnings. Growth is tax-sheltered within the Income Tax Act’s exempt limits. In retirement the policy is pledged as collateral for a loan from a third-party lender; lending is not guaranteed, and where the policy is corporately owned the borrower is the corporation, so amounts distributed from the corporation to its shareholder are generally taxable. On death, the death benefit above the policy’s adjusted cost basis credits the Capital Dividend Account, and capital dividends flow tax-free to Canadian-resident shareholders. The insurance need must come first.
RiskX Insurance Brokers Inc. is an independent, family-run Canadian insurance and benefits brokerage, founded in 1994 and licensed in Alberta and Ontario, serving business owners from offices in Calgary and Toronto.
Last updated: August 2026
How a Corporate Insured Retirement Plan works.
Think of it as a tax-advantaged way for your corporation to set money aside and draw on it later. It layers two things: an overfunded permanent policy that builds cash value, and, in retirement, a loan from a third-party lender secured by that value.
Fund an exempt permanent policy
Your corporation buys a permanent life insurance policy (usually participating whole life) and funds it with surplus cash. Because the company uses lightly-taxed corporate dollars, less is sent to Ottawa than if you paid yourself first.
Cash value grows tax-sheltered
The policy's cash value grows without annual tax, within the Income Tax Act's exempt limits. Unlike an RRSP or TFSA, it isn't capped by contribution room, though tax rules do limit how much can go in while keeping its tax-sheltered status.
Access later, through a bank loan
In retirement the policy is pledged as collateral for a loan from a third-party lender. Lending is not guaranteed, and it sits outside the insurance contract. The loan is advanced by a third-party lender, not by the insurer. Where the policy is corporately owned, the borrower is the corporation, and amounts distributed from a corporation to its shareholder are generally taxable. The loan is repaid later from the death benefit.
At death, the estate keeps the balance
The death benefit first repays the loan and interest. For a corporate policy, the amount above the policy's adjusted cost basis credits the Capital Dividend Account, so the balance can flow to your family tax-efficiently.
Why fund it with corporate dollars?
Once your corporation earns more than $50,000 of passive investment income in a year, it starts to lose access to the small-business tax rate on its first $500,000 of active income, and that benefit is fully gone by $150,000 of passive income. Ordinary investments inside the company can quietly trip that threshold.
Growth inside an exempt life insurance policy does not count as passive investment income, so it doesn't trigger that grind. That's a big part of why corporate-owned permanent insurance is used to hold surplus cash for the long term.
Sources: Department of Finance passive-income rules; BDO, corporate-owned life insurance. General information, not tax advice.
Independent means we'll tell you when it's the wrong answer.
We're a father-and-son brokerage, owned and operated in Calgary since 1994, and we don't manufacture the product, so we shop the market and recommend what fits you. An Insured Retirement Plan is powerful for the right situation and wrong for plenty of others. We start with an honest conversation, and when your situation calls for it, we bring in our estate-planning specialist, a chartered accountant with more than 20 years of experience, for the tax and structuring work.
Who it's for, and who it isn't.
The insurance need comes first; the financing is secondary. This strategy tends to suit owners who need permanent life insurance anyway and have long-term surplus cash they won’t need for years. It can also fit owners who are behind on retirement savings. That runs against the usual “max your RRSP and TFSA first” advice, but if your family needs the protection anyway, one policy can do both jobs - protect them now, and help fund part of your retirement later.
Often a good fit
- Profitable, established companies with surplus cash
- Owners behind on retirement savings who need to protect their family
- A genuine long-term need for permanent life insurance
- A 15 to 25 year time horizon before drawing on it
Usually not the answer
- You may need the cash for operations or in the near term
- You are close to retirement with no time to fund it
- There is no genuine need for permanent life insurance
- You want a guaranteed, short-term, or liquid investment
- The retirement cash flow is a loan from a third-party lender, secured by a collateral assignment of the policy. The loan plus interest is repaid from the death benefit, which reduces what your beneficiaries receive.
- Leverage increases risk. Loan rates can rise, and if the policy underperforms or rates climb, a lender can ask for more collateral or repayment.
- Policy cash-value growth, dividend or interest scales, and future loan availability are not guaranteed and will vary.
- Tax treatment depends on current tax law and the policy keeping its exempt status. Rules can change, and the Canada Revenue Agency actively reviews leveraged-insurance arrangements.
- It suits people who need permanent life insurance anyway and have long-term surplus cash. The insurance need comes first; the financing is secondary. It is not for everyone.
How an IRP compares to the alternatives.
| Strategy | Best for | How it works |
|---|---|---|
| Insured Retirement Plan (IRP) | Long-term corporate surplus, accessed in retirement | The policy is pledged as collateral for a bank loan in retirement; the loan is repaid from the death benefit. |
| Immediate Financing Arrangement (IFA) | While still working | Borrow back the money used to fund the policy to keep it working in the business; may allow an interest deduction. |
| RRSP / registered plans | Personal retirement savings | Tax-deductible contributions within annual limits; withdrawals are taxable income. |
An IRP is one piece of a bigger estate plan.
The same corporate-owned insurance that funds your retirement strategy can also credit your Capital Dividend Account and help your family pay the tax at death without selling the business. See how the whole picture fits together.
Explore corporate estate planningInsured Retirement Plan questions owners ask us.
What is an Insured Retirement Plan?
An IRP funds a tax-exempt permanent life insurance policy, then uses its cash value as collateral for a loan from a third-party lender in retirement, with the death benefit repaying the loan at death.
What is a Corporate Insured Retirement Plan (CIRP)?
It is an IRP owned by your company, funding an exempt policy with corporate surplus so retained earnings can grow without being taxed every year.
Who is an IRP best suited for?
Profitable, established businesses and owners with long-term surplus cash and a genuine need for permanent life insurance. That can include owners who are behind on retirement savings: the same policy protects their family and can help fund part of their retirement. Whether it fits is confirmed in a personalized review.
What type of insurance is used?
Usually participating whole life, sometimes universal life, because the policy must be a permanent, exempt policy that builds cash value.
How is the retirement loan treated for tax?
The policy is not cashed in. It is assigned as collateral for a loan from a third-party lender. That is not a policy loan from the insurer, which is a disposition and can be taxable. Tax treatment can change.
What happens at death?
The death benefit first repays the outstanding loan and interest. For a corporate policy, the net amount above the policy's adjusted cost basis credits the Capital Dividend Account for tax-efficient distribution.
What are the main risks of an IRP?
It is a long-term, leveraged strategy. Loan rates can rise, policy growth and dividends are not guaranteed, a lender can call the loan, and tax rules can change. The insurance need must come first.
How is an IRP different from an Immediate Financing Arrangement (IFA)?
An IFA lets you borrow to reinvest in the business while working and may allow interest deductions; an IRP is accessed later, in retirement, and generally does not.
Do my beneficiaries still get a death benefit?
Yes. The loan is repaid from the death benefit, and any remaining amount goes to your beneficiaries or, for a corporate policy, to the estate through the Capital Dividend Account.
Are the premiums tax-deductible?
Generally no, except for a limited collateral insurance deduction when the policy is required as security for a business loan. Confirm with your accountant.
Does IRP income affect Old Age Security?
It depends on how the arrangement is structured and on your personal situation. Confirm the OAS treatment with your own accountant before acting.
For informational purposes only; not tax, legal or accounting advice. An IRP is a long-term, leveraged strategy that is not suitable for everyone: policy dividends and cash values are not guaranteed, loan interest rates can rise, and tax rules can change. The insurance need must come first. Growth is tax-sheltered within the Income Tax Act’s exempt limits. Retirement access is by way of a loan from a third-party lender secured by a collateral assignment of the policy, not a policy loan from the insurer, which is a disposition and can be taxable. Lending is not guaranteed and no lender is obliged to lend in future. Where the policy is corporately owned the borrower is the corporation, and amounts distributed from a corporation to its shareholder are generally taxable. On death, the death benefit above the policy’s adjusted cost basis credits the Capital Dividend Account, and capital dividends flow tax-free to Canadian-resident shareholders. Confirm treatment with your own accountant and lawyer before acting. RiskX Insurance Brokers Inc. is a licensed insurance brokerage, not an insurer or accounting firm.
See whether an IRP fits your situation.
Book a free intro call. We'll gauge where you're at and whether an IRP is worth exploring. If it is, we'll bring in our estate-planning specialist, a chartered accountant with more than 20 years of experience, and prepare a personalized illustration.
Book a free intro call