Executive Health Plan (EHP)

A solution for your business in the event of a critical illness

The success of a company depends largely on the contribution of key people; owner-operators, actively engaged shareholders, etc. The sudden loss of one of these key contributors, even temporarily, can threaten the future of the business. The EHP helps protect the finances of the business that can be put in peril by a serious illness of a key person.

Should the insured remain healthy until they are no longer participating in the operations of the business, they can terminate the insurance coverage and claim a health benefit. This potentially substantial benefit is an effective and innovative way to reward and retain key personnel.

The EHP uses advanced tax and legal concepts that aught to be fully understood prior to proposing this solution to your business clients. Sufficient understanding of these notions will help ensure that you guide your clients to make the most of this strategy.

How the concept works

Provides business protection through critical illness insurance on the life of a key person (typically the primary shareholder)
Offers a death benefit to the company should the insured pass away suddenly
Provides a non-taxable health benefit to the insured upon cancelation of the contract, assuming that the insured remains healthy until there is no longer a business need for coverage
Coverage is owned jointly between the corporation and the insured with premiums being paid in correlation to their interest in the plan

Setting up an EHP

The company and the individual jointly purchase Health Priorities – Business critical illness insurance
- The company pays the portion of the premiums for the critical illness and death benefits for the needed coverage period
- The insured pays for the portion of the premiums for the health benefit, which is actuarially calculated based on the corporate need for coverage, age and health status at time of application
The client’s legal advisor prepares a shared ownership insurance agreement
At the first of the following events, a non-taxable* benefit is paid:
- Upon diagnosis of a covered critical illness the CI benefit is payable to the company
- Upon death of the insured the death benefit is payable to the company
- Upon expiration of the company’s need for coverage, typically upon retirement of the insured, the health benefit is payable to the insured**

* When the employee is not a shareholder, the tax authorities may be of the view that the employee received a taxable benefit by virtue of their employment when the health benefit was paid. The determination of the value of this benefit is a question of fact and clients should consult an independent taxation advisor in this regard.

** The health benefit is not available if the company continues to require coverage

Applicable products

Health priorities – business

Term to 75
Term to 100

Return of premium at cancelation (Health Benefit) options:

50% after 10 years; 100% after 15 years
35% after 10 years; 100% after 20 years

The Executive Health Plan is ideal for business owner clients who are:

Operating a Canadian-controlled private corporation (CCPC)
Have established, stable business operations with excess cash flow and/or significant retained earnings
Actively involved in the day to day operations of their business
Looking to protect the business should they be unable to work
Interested in planning for their transition out of the business
Pay higher taxes on their active business income due to significant passive income that has caused a loss of access to the small business deduction (SBD)

Note: EHP may also be a fit for certain key employees, though, when the employee is not a shareholder, the tax authorities may be of the view that the employee receives a taxable benefit when the health benefit is paid.

Targeted age: 30 to 55

Clients must be in a position to qualify medically for critical illness insurance.

Sales approach

Here are a few questions to ask your client:

Could your company manage without you?
How would the smooth running of the business be ensured if you were absent due to a covered critical illness?
Will your corporate assets be used to help fund your retirement?
What is your transition plan out of the business?
Do you have a key employee who you could not operate without? Would you like to reward them for their service and assist with their recovery should they become ill?

To proceed with the creation of an Executive Health Plan (EHP), the following characteristics must be present in the underlying product illustration:

The policy owner must be both the insured and the corporation
Health Priorities – Business must be the selected coverage type

Procedure to illustrate the EHP:

With the insurance illustration software, once the client data and coverage details have been specified, click the Sales Strategies tab.
Open the Concepts section.
Select Executive Health Plan (EHP) from the drop-down menu.
Download the concept by clicking on Export. The data in the illustration will be transferred to a spreadsheet. You will have 60 minutes to open the spreadsheet and access the data, after this time, the spreadsheet will need to be downloaded again.
When opening the spreadsheet, activate the contents and macros.
The following screen will appear:
The sections outlined above can be modified and should be reviewed for accuracy
- Company name
- Indication of the insured’s status as a shareholder or key employee
- Scenarios for illustrative purposes. When check off the follow sections will be made available for modification, allowing for a planned retirement age to be selected.
- Tax information for both the insured and the company
- Rate of return for the comparable investment
If any of the populated data, that which can not be modified, is incorrect, quit the spreadsheet in order to correct the information on the illustration software and re-run the download.
Click on the PDF icon to produce the report.
A copy of the report will automatically save in the directory entitled: “\Downloads\Desjardins”. you also have the option to manually save the document in pdf format.
When you have finished consulting the report, return to the input screen to close the excel program.
Only the save pdf report can be used to view the spreadsheet results. To illustrate the concept again, please produce a new illustration and download the concept from the Sales Strategies tab.