The Design Practice and the Obligation That Outlives the Work

A design project ends on delivery. The fee is paid, the file is closed, and the building goes on to be loaded, heated, frozen and lived in. A defect in a connection, an envelope or a mechanical system can show up years later, and the claim that follows is about the work, not about the date on the last invoice.

So two questions come before any product. First, is your past work still covered by professional liability insurance after you stop practising, and who pays for that cover? For some readers the answer is already in place: some professional programs, among them those for Ontario and Quebec architects, continue cover for past work after retirement at no premium to the retired member, subject to their conditions. Others hold a commercial claims-made policy and will need an extended reporting period or continued cover, priced by the insurer. Second, can the practice carry its costs through the gaps between fee stages?

Life insurance answers neither question directly. It comes in near the end, for readers who also have a lasting need for life insurance, and it is explained there with every party, cost and tax rule named.

Why can a claim arrive years after the project is delivered?

A claim starts when a problem becomes apparent, not when the drawings were sealed. Water, movement, frost and load reveal a fault slowly, so the time between the sealed drawing and the first letter from a lawyer can run to years.

How long you can be sued is set by provincial law, and the rules differ from one province to the next.

• Ontario's Limitations Act, 2002 pairs a basic period that runs from when the claim was discovered with an ultimate period counted from the act or omission, subject to exceptions. British Columbia and Alberta also combine a discovery period with an outer limit in their own statutes. The lengths, the starting points and the exceptions are not the same everywhere, and they have been amended over the years.
• Quebec works under its Civil Code, a civil law system with its own rules. The general prescription period for an action is three years (article 2925). The Code also has its own rule on when the period starts for an injury that appears gradually, and specific provisions on the liability of architects and engineers, alongside contractors, for the loss of a work after it is completed. Do not carry the Ontario idea of an ultimate period into Quebec; ask a Quebec lawyer what applies.

Your engagement contracts can add clauses of their own on liability, notice and insurance. A lawyer in the province where the work was done reads the statute and the contract together and gives you the dates. Bring the project's location, the contract, the date the work was completed and the date anyone first noticed the problem.

What matters for planning is the shape of it. Fees arrive while the project runs. The exposure can run on for years after it ends.

What does claims-made cover mean for work you finished years ago?

Professional liability insurance for design work may be written on a claims-made basis; the first page of your policy says which. In broad terms, the policy that responds is the one in force when the claim is made against you and reported to the insurer, not the one in force when you did the work.

The detail is in the wording. Depending on the policy, coverage can turn on when you first knew of a claim or of a circumstance that could lead to one, when you reported it, the retroactive date, who is insured and what is excluded. A circumstance you knew about and kept to yourself can fall outside the policy you hold when the claim finally arrives.

That runs against the way many people think about insurance. A homeowner expects the policy in force on the day of the fire to pay. Here the work and the claim can sit in different policy years, so continuity matters more than any single year's cover. A gap in cover, or a change of insurer with the wrong retroactive date, can leave completed work outside the protection you assume you still have.

Read these off your own policy rather than from memory:

1. The basis on which it is written: claims-made or another basis.
2. The retroactive date, and whether it reaches back to your first project.
3. The reporting rules for claims and for circumstances, and their deadlines.
4. Whether defence costs come out of the limit or are paid in addition to it.
5. The deductible, and who in the firm is insured.

If something on a past project worries you, tell your insurer or broker promptly and in writing. Late notice is one problem that is entirely in your hands.

What happens to your cover when you retire or close the practice?

It depends on your profession, your province and who insures you. Do not assume either that you are covered or that you will have to buy cover. Some professions have programs that already continue cover for a retired member's past work, and in some of them the retired member pays no premium for it.

Here is what each program says on its own pages, as we read them on 1 October 2026. Each is the program's own description, not the contract; the policy wording and the program's current rules decide.

Two cautions go with the table. A program's limits may be lower than what a client contract promises, so check your contracts for insurance obligations that last beyond completion. And programs change their rules, so read the current page and the policy wording, and get the answer for your own file in writing.

So who carries the cost? For an eligible Ontario architect with Pro-Demnity or a Quebec architect with the Fonds, the programs describe the retirement cover as carrying no premium for the retired member, although a deductible applies to a claim. For a Quebec engineer with retired status, the cover sits inside the Order's basic plan. For a practitioner on a commercial policy, it is a premium you pay yourself, possibly in years with no fees coming in. That last reader is the one for whom setting money aside for it makes sense.

Partners and buyers have their own version. When a partnership dissolves or a practice is sold, the agreement should say who answers for work done before the change and how that work stays covered. A buyer may ask the seller to prove it.

What should you ask before you close the practice?

Ask in writing, and keep the answers with the project records.

1. Your insurer or broker: how will a claim about work done before the closing date be reported and covered, for how long, at what limits and deductible, and at what cost, if any?
2. Your order or program: do you meet its conditions for retirement cover today, and what would end that cover, such as a return to practice?
3. Your lawyer: which limitation or prescription rules apply to your largest past projects, and what do your client contracts promise about insurance after completion?
4. Your partners or a buyer: who answers for work the firm did before the change, and where does the agreement say so?
5. Yourself: where will drawings, correspondence and site records be kept, by whom and for how long? A claim made years later is defended with those files.

An approximate answer today is worth more than an exact one in the month you retire. If you will need an extended reporting period, ask for an indicative price now, treat it as a figure that can change, and plan for a higher one.

Why does a profitable design practice run short between fee stages?

Fees follow stages, not the calendar. Payment arrives as schematic design, design development and construction documents are completed, at tender, and then in instalments during contract administration, which can stretch across a long build.

The work is continuous; the receipts are not. Salaries, rent, software licences, professional dues and the liability premium keep running between stages.

And the client sets the pace. An approval stalls, a review runs long, a project pauses while the owner settles its financing. The practice absorbs the delay, and its costs carry on as before.

Across several projects, none of this is random. A practice with a few completed projects can measure the distance between its stage payments from its own records. That turns a recurring surprise into a number you can plan around.

How do you measure the gap from your own projects?

Use a worksheet with named inputs, each one taken from a document. Treat the result as a first stress test, not as your working capital requirement. A past gap shows what has happened; the next one can be longer.

Illustrative example. Assume fixed costs of $42,000 a month and a longest observed gap of 4 months, so $168,000 of fixed costs over the gap. Remittances due in that window are $12,000, and you add a contingency of 10 per cent on both, or $18,000. Outgoings come to $198,000. Receipts you can count on from other projects are $45,000, and you start with $60,000 in the account. The shortfall is $198,000 less $45,000 less $60,000, or $93,000. With $75,000 of undrawn committed credit, $18,000 is still uncovered. Every figure is an assumption; the arithmetic was checked.

Then build a month by month forecast for the year ahead: opening cash, receipts by project and stage, payroll, rent, remittances, insurance and debt payments. Find the lowest projected balance and the date it falls on, and compare that low point with your committed credit. That is the number to plan around, and it changes each time a project is signed or delayed.

Is a stage gap the same as a construction holdback?

No, but design fees can be caught by holdback and lien rules as well, so each needs its own answer.

A stage gap is not a retention. Nothing is being held back. The next fee is not yet due because the stage is not finished, and the client's decisions set the interval.

A holdback is a share of a payment kept back under a statute or a contract and released later. Whether it touches a design fee depends on the province, the project and the contract. Ontario's Construction Act requires each payer on a contract or subcontract under which a lien may arise to keep a holdback, and whether your design contract is one of those is a question for a construction lawyer. In Quebec, article 2726 of the Civil Code gives architects and engineers, among others, a legal hypothec on the building for the work the owner asked for, and article 2727 sets short deadlines to keep it. The contractor's side of these rules, with the statute readings and their dates, is under holdbacks and working capital.

If some of your fees are held back, list each amount and its release date in the worksheet, and count it as a receipt only once its date is certain.

Does incorporating protect you from a claim about your own work?

Not in the way many people hope. Incorporation separates the business from the person for commercial and tax purposes. Where a licensed professional performs and seals work, personal professional liability generally attaches to that individual, and an incorporated professional remains personally liable for their own professional acts.

What limits the exposure is a combination: the insurance and its wording, the terms of engagement, the care taken on the work, the quality of the project records, prompt reporting and the applicable limitation rules. A lawyer assesses the legal side and the broker answers the coverage side. Ask both in writing.

What a professional corporation may do, and who may hold its shares, is set by provincial law and by the professional regulator. A lawyer practising where you are licensed confirms it.

The seal also creates a working dependency. In a practice built around one licence holder, every project passes through one signature. If that person is ill or away, some work cannot move until another qualified professional takes responsibility for it, and a client on a construction schedule may not wait. The same dependency runs through a consultant with one client and a contract that ends.

What happens to the practice, and to the obligation, when you stop?

What a practice is worth to a buyer is a separate question, set out for a veterinary practice. For a design practice, do not assume it is saleable, and do not assume it is worthless. A founder's reputation may not transfer in full, but staff, systems, contracts in progress and repeat clients can have value to a buyer. Only an actual transaction tells you.

Whatever happens to the business, completed projects keep ageing, and the professional whose seal is on the drawings stays the person a claimant names. Income has a last day; the obligation can have a later one. The years between them need a plan: the cover question first, then the cash question.

A closing checklist keeps the plan honest:

• Every open contract completed, assigned with the client's written consent, or ended on its terms.
• Subconsultants' certificates of insurance kept on file for each project.
• Project records stored, indexed and retrievable for as long as a claim could be made.
• Your order told, in the form it requires, of the change in your status.
• Your insurer told in writing of the closing date and of any circumstance you know about.

Where does a participating policy fit, and whose idea is it?

The idea is not this practice's. The financing approach R. Nelson Nash called The Infinite Banking Concept® is a mark of Infinite Banking Concepts, LLC, described in his own writing. Neither Canadian Wealth Creation Centre Inc. nor Jose Salloum is affiliated with that organisation or endorsed by it.

Infinite Financial Sovereignty® is a registered trademark of Jose Salloum. It names a narrower discipline carried out over a lifetime: own permanent life insurance for the protection it gives, and know in advance, in writing, what you could borrow against it, from whom and on what terms, before a repeating need for capital comes back.

For a design professional, that would mean a specially designed, high-cash-value, participating whole life insurance policy, owned by you or by your corporation, on your life or a partner's, issued by a life insurer licensed in Canada. Solvency supervision depends on how the insurer is chartered: OSFI supervises a federally incorporated insurer, and the home province, the AMF in Quebec, supervises a provincially incorporated one.

It belongs in the picture only once three things are true: you have a lasting need for life insurance, your liability cover and your retirement cover are settled, and the practice has surplus in an ordinary year. It is life insurance first. It is not a savings account, and it is not a fund for a cost that a professional program already carries. Do not buy a policy to meet a need you expect in the next few years.

Who lends, who is paid the interest, and what happens if the loan is not repaid?

Two different debts can involve the same policy. Know which one you are signing.

A policy loan. The owner, you or your corporation, asks the insurer for an advance. The insurer lends its own money, up to a loan value the contract sets, secured by the policy's cash value. The owner owes the insurer, and the interest is charged by and paid to the insurer, at a rate the insurer sets and may change. Unpaid interest can be added to the loan, depending on the contract.

A loan from another lender. The owner borrows from an outside lender and pledges the policy by a collateral assignment (a hypothec in Quebec), which the insurer records. The lender decides whether to lend and receives the interest. The owner still owns the policy and gets the lender's release on repayment.

No lender imposes a repayment schedule on a policy loan, but that freedom has limits. Interest keeps accruing at the insurer's rate. If the loan and unpaid interest grow past the value securing them, the policy can end under the contract's terms, and that ending can produce taxable income. An advance left unpaid turns policy value into debt that reduces the death benefit. Name the repayment source and its date, such as a stage payment under a signed contract, before you borrow.

If your corporation owns the policy, the advance goes to the corporation, not to you. Moving money from the company into your hands is a second transaction, by salary, by dividend or by repaying a shareholder loan, each with its own tax. The mechanics are set out in how a policy loan works and when a policy loan becomes taxable.

When could policy value help a design practice, and when should it not?

In the early years, little. Early accessible value may be well below the premiums paid, and when a policy reaches a loan value worth using depends on its design, its premiums, the dividends actually paid and the loan terms. Ask for the figures in writing.

Later, a policy loan can be one source of money for:

• the deductible on a professional liability claim;
• an extended reporting premium, for a reader on a commercial policy who needs one;
• a stage gap larger than your reserve and your committed credit;
• a slow season.

For each of these, a cash reserve or a committed line of credit meets the same timing need without a long premium commitment. A policy earns its place only where you also have a lasting need for life insurance. And a reader whose retirement cover carries no premium through a professional program has no run-off premium to fund.

Before relying on a policy already in force, run a written test:

1. Take the shortfall from your gap worksheet.
2. Ask the insurer in writing for the maximum loan available today and the balance already owed, interest included. The difference is what you can borrow.
3. If that is smaller than the shortfall, the policy is not your bridge this time.
4. Name the repayment source and its date.
5. Ask for the projected balance at that date with interest added, and keep a margin below the maximum loan that you agree in writing with your advisor.

Before buying, ask for a dated illustration showing, for years 1, 3, 5, 10, 20 and your planned retirement year: premiums paid, the guaranteed cash surrender value, the illustrated value at the current dividend scale and at a lower one, the maximum loan available, the death benefit and the adjusted cost basis. Add a scenario in which premiums stop, and the contract's loan and lapse provisions. The cash surrender value is the figure that matters. An illustration is not the contract, and dividends are not guaranteed.

A practice that can wait is better placed to turn down a project on poor terms. That is a benefit of any reserve, not of a policy in particular.

What about the ability to work, and insurability?

For a practitioner who carries the seal, the ability to work drives every fee. Check what already protects it before you assume anything: a group plan, an association plan or an individual disability policy. Read how each one defines disability, by your own occupation or by any occupation, how it verifies income, and what it pays on a partial recovery. A licensed professional reads the wording with you. A life insurance policy is not disability income insurance. For a sister profession, see disability and the capital plan.

Insurability can be lost quietly. Coverage is underwritten on health and occupation at the time of application, and a later diagnosis can change the terms on offer or close the door. That argues for not putting off an assessment, not for hurrying a purchase. An underwriting decision is information, not a commitment, and anyone using it to create urgency is misusing it.

Who owns the policy when there is a corporation or partners?

Three decisions go together: who owns the policy, who pays the premium and who is named beneficiary. They are set out at length under corporate-owned life insurance.

A mismatch has a tax cost. When a corporation pays a premium on a policy owned by, or benefiting, a shareholder personally, the CRA can assess a shareholder benefit under subsection 15(1) of the Income Tax Act. A corporate-owned policy pledged as security for a shareholder's personal loan raises its own benefit question. Review both with your accountant before anyone signs.

Some practices run an operating company alongside a holding company. Which entity owns, pays for or is named beneficiary of a policy is a decision for you, your accountant and your lawyer. Each choice gives a different result on a death, on a sale, with creditors and on a reorganisation.

Partners add a buy-sell question. Where a partnership or shareholders' agreement already contains a buy-sell provision, that provision governs, and the insurance is fitted to it rather than the reverse. See funding a buy-sell agreement. In Quebec, a married or civil union spouse named beneficiary in a writing other than a will is irrevocable unless the designation says otherwise (Civil Code, article 2449), which matters when the policy is meant to serve the practice.

How is a corporate policy taxed?

The answer rests on facts about your corporation, confirmed by its accountant before anyone applies.

Premiums are generally not deductible. Paragraph 20(1)(e.2) of the Income Tax Act allows a limited deduction where an interest in the policy is assigned to a restricted financial institution in the course of borrowing from it, the interest on that borrowing is deductible, and the institution requires the assignment as collateral. The deduction is then the least of the premium, the net cost of pure insurance for the year and the part that can reasonably be related to the amount owing. That is our reading; your accountant applies it.

Interest can be deductible under paragraph 20(1)(c) only when the money is used to earn income from a business or property, and that paragraph excludes money borrowed to acquire a life insurance policy. For a policy loan, the interest counts only as the insurer verifies it on CRA form T2210.

Growth inside the policy is not taxed each year while the policy remains exempt under section 306 of the Income Tax Regulations. Exempt status has to be maintained, and a change made carelessly later can cost it.

A policy loan is a disposition under subsection 148(9). Only the part of the loan above the adjusted cost basis immediately before the loan is income, and the loan lowers the basis. Repaying it restores the basis and can give a deduction under paragraph 60(s), limited to amounts previously included in income.

When a private corporation receives life insurance proceeds because of a death, it adds to its capital dividend account the proceeds less the policy's adjusted cost basis immediately before the death, under paragraph (d) of the definition in subsection 89(1). An insurer policy loan outstanding at death reduces the amount received. Paying a capital dividend needs an election under subsection 83(2), filed on time, and a shareholder who lives outside Canada is subject to withholding tax on it. The details are in the capital dividend account.

Before surplus is left in the corporation to pay premiums, name the regimes that can apply to it: the small business deduction and its business limit; the passive income rule, which reduces that limit as adjusted aggregate investment income rises; the personal services business rules, if the corporation's work looks like employment; and, in Quebec, the paid-hours condition on the provincial small business deduction. The passive income rule is set out separately. Federal rules apply everywhere, and Quebec corporations also deal with Revenu Québec.

What stands behind the contract?

The insurer's promise and its solvency. No government backs the policy, which puts it in a different position from a deposit.

Assuris protects policyholders if a member insurer fails. For a whole life policy, as read on assuris.ca on 1 October 2026, you keep up to $1,000,000 or 90 per cent of the promised death benefit, whichever is higher, and up to $100,000 or 90 per cent of the promised cash value, whichever is higher, both calculated on net values after any policy loans. Every life insurer authorized in Canada must be a member. That is not deposit insurance.

Dividends are not guaranteed. The insurer's board declares them each year based on the performance of the participating account, and past dividends do not indicate future ones. Read the guaranteed values separately from the illustrated values built on top of them.

What does this not do?

It does not shorten a limitation period, and it does not replace professional liability insurance or a program's retirement cover. A claim about your work is answered by that cover, your contracts and your records.

It does not remove interest. The insurer charges interest on every policy loan, and that interest is paid to the insurer.

It does not replace a line of credit. Keep committed outside credit for a gap that outruns everything else; credit arranged in a calm year is easier to arrange.

It is not an investment. Participating whole life is insurance, so do not judge it as a portfolio by its rate of return. Compare it with the alternatives that do the same job.

It does not reward being started and dropped. A policy surrendered in its early years may return less than the premiums paid, depending on the design and the year. Ask your accountant what income a surrender would create.

Who does this not suit?

A practice without surplus in an ordinary year, as distinct from one with an unusually large project in it. A premium needs surplus that recurs.

A practitioner whose liability cover, retirement cover or disability protection is unsettled. Those meet the actual exposure, and buying a policy first reverses the order.

A practitioner carrying expensive debt, or one who may need the money back within a few years. Clearing costly debt is a certain saving, and an early surrender can return less than was paid in.

A practitioner who plans to stop before the policy has had time to build value. When that is depends on the contract, so look at the guaranteed and illustrated surrender values at your planned retirement year, and at a scenario in which premiums stop.

And anyone without a lasting need for life insurance, or whose accountant and lawyer have not reviewed the structure. A no in the first half hour is worth more than a yes nobody checked.

In what order should you deal with it, and who answers what?

1. Read your liability policy and write down the five items listed above. It costs nothing.
2. Ask your insurer, broker and order in writing what covers your past work after you stop, and at what cost, if any.
3. Measure your stage gaps with the worksheet, then build the twelve-month forecast and arrange committed credit for its low point.
4. Check what protects your ability to work.
5. Take the whole picture to your accountant and your lawyer.
6. Only then ask whether a life insurance policy belongs in it at all. Purpose first, structure second, product last.

Reading costs you nothing. If a policy is bought, the firm is paid by the insurer's commission, so ask any advisor you meet how they are paid.

Where does the rest of this sit?

The corporate structuring behind all of it is in business owners. The contract itself is explained in how a participating policy works. The costs and the ways a policy can disappoint are in the real costs. For a firm with partners, read the partnership buy-in and the year of highest debt.