Key Person Insurance: Life Insurance as a Business Expense

Most people, no matter how much they dread paying life insurance premiums, agree that life insurance is important. However, unlike insurance on a business owned vehicle or on the property used by a business, life insurance is usually not deductible as a business expense. One exception to that may be key man or "key person" insurance.

Keyman life insurance is insurance on a business owner or officer, generally a person who is "key" to the operation of that businesses and who would be difficult and costly to replace. While you should always check with your tax professional, life insurance purchased on a key individual, with premiums paid by the business and the business named as beneficiary, can be a tax deductible expense for the business.

Before seeking for a quote, those paying the premium on key person insurance need to have a basic understanding of both the types of insurance and of the purpose for the insurance. Life insurance comes in two basic categories—temporary, or term insurance, and permanent or whole life insurance. Each of these categories has multiple variations, but before worrying about the finer details, decide whether you need the insurance for a limited time period or for the life of the insured.

If the purpose of the insurance is to pay off a business loan in the event of the untimely death of the principal, or to provide for any other temporary need, a 20 or 30 year term would  be very low cost for high face value policies. If, on the other hand, you want the coverage to be permanent or if you want the policy to be not only a death benefit but also a business investment with additional options, you will want to consider a permanent life policy which could be either a universal or a whole life. If you are working with someone who has a variable license and is a proven and successful investor, you might even check into a variable universal. The risks of a variable policy are greater than with a fixed policy, but so are the rewards.

Regardless of the type of insurance you ultimately buy, it is a good idea to work with a real person. Use our user friendly sight to educate yourself about insurance and then enter some basic information. You will be contacted by professionals who will be licensed to provide you with not only the insurance you need, but also with the information to help you determine how much insurance you need and which company will actually be the most qualified to serve you.