Business owner’s all have the same type of insurance policies available that employees have, but with very different concerns. The common life insurance concerns for businesses are what formulated our recommendation for the best policy for a owner.

Index Universal Life: Our number one go to policy for a enterprise owner is the IUL. This is effectively a annually renewable term policy that can be overfunded to affect cash accumulation. This cash value can be credited interest based on how the major Indices of the stock market perform. This structure allows for an adjustable premium that can fluctuate with the financial conditions the owner is experiencing, while maintaining full benefit coverage. The cash value accumulation can be accessed on a tax free basis and can be used as a executive bonus, source of financing, bank loan collateral, and even as non-qualified delayed income accounts. IUL’s also offer a host of attachments of coverage, called riders, that allow owner’s to enjoy medical and disability benefits as well. Benefits like critical, chronic, terminal, and long term care illness coverage often come a high premium if sourced from stand-alone policies.

This is one of the most asked questions we receive, the underlying concern being how the owner can leverage their business to pay premiums in a tax advantaged way. The immediate answer is yes, a business can make payments on behalf of the owner, on the owner’s life insurance policy. Whether or not this will result in tax avoidance or a tax deduction depends on the structure of the business and who the coverage in question benefits. In general, only a incorporated business can use life insurance as a way to deduct or avoid taxation. Any payments made by a business not on some schedule of incorporation, will be included as income for the owner and therefore fully taxable for that period.

As with all the other responsibilities that come with business ownership, the purchase of life insurance on the business owner will be up to the owners themselves. If you have a business partner or a key employee who generates significant income for your company, it is not something that can be procrastinated on for the sake of your own best interest. Reach out to a independent brokerage that has the industry knowledge and experience working with business owners for help getting your plans in place. You can submit a contact request or call Bay Life Brokerage from 9am-6pm Monday-Friday and Saturday mornings, for immediate help with your concerns.