Small Business Insurance Ontario – Criss-Cross Insurance (Guaranteed Funding)

What is Criss-Cross Insurance (Guaranteed Funding)?

Criss-Cross Insurance, also known as cross-purchase insurance, is a policy where business partners purchase life insurance on each other. This ensures that if one partner dies, the surviving partner receives the funds needed to buy out the deceased partner’s share, maintaining business continuity.

Key Features of Criss-Cross Insurance

• Cross-Purchase Agreement: Partners buy life insurance on each other.
• Guaranteed Funding: Ensures funds are available for buyouts.
• Ownership Continuity: Helps maintain control within the surviving partners.
• Tax Benefits: Premiums are generally not tax-deductible, but the death benefits are usually tax-free.

Who Benefits from Criss-Cross Insurance?

This insurance is ideal for small businesses in Ontario with multiple owners. It provides financial security and ensures the business remains operational in the event of a partner’s death.

How Does Criss-Cross Insurance Work?

Step-by-Step Process

1. Policy Setup: Business partners agree on a cross-purchase plan and purchase life insurance policies on each other.
2. Premium Payments: Partners pay the premiums to keep the policies active.
3. Event Occurrence: In the event of a partner’s death, a claim is filed.
4. Benefit Payments: The insurance company provides a lump sum payment to the surviving partner(s), enabling them to buy out the deceased partner’s share.

Real-World Applications

Case Study: A Small Consulting Firm in Ontario

Consider a small consulting firm in Ontario with two partners. If one partner passes away, Criss-Cross Insurance provides the funds for the surviving partner to buy out the deceased partner’s share, ensuring the firm can continue its operations smoothly.

FAQs About Criss-Cross Insurance

1. What does Criss-Cross Insurance cover? It covers the financial impact of losing a business partner due to death, providing funds for buyouts.

2. How long does the policy last? Policies can be structured to last as long as the partnership remains critical to the business.

3. Are the premiums tax-deductible? Premiums are generally not tax-deductible, but the death benefits are usually tax-free.

4. Can the policy be customized? Yes, policies can be tailored to fit the specific needs of your business, including coverage amount and benefit period.

5. What happens if the business dissolves? If the business dissolves, the policies can be transferred, or the partners can choose to cancel them.

6. Who should consider Criss-Cross Insurance? Any small business with multiple owners should consider this insurance to ensure smooth ownership transitions.

7. How are the benefits used? The benefits can be used to buy out the deceased partner’s share, ensuring the business remains operational.