Is business-owned life insurance more expensive than personally owned coverage?

Business-owned life insurance is not inherently more or less expensive than personally owned coverage — both are priced based on the same actuarial factors (the insured person's age, health, coverage amount, and product type). The difference is in how costs are paid, by whom, and how they are treated for tax purposes.

Who pays: for key person insurance, the business pays the premium. For personally owned individual life insurance, the individual pays the premium. For executive bonus plans, the business pays but the executive is taxed on the premium as income.

Deductibility: personally owned individual life insurance premiums are not deductible by the individual. Business-paid group life premiums are deductible by the employer. Key person premiums are not deductible. Executive bonus premiums are deductible as compensation.

After-tax cost comparison: a business that can deduct a premium pays less in after-tax dollars than a business or individual that cannot. Executive bonus plans allow businesses to use pre-tax dollars (effectively) to fund executive coverage, while the executive gets permanent life insurance at a lower net cost than buying independently with after-tax dollars.

Bottom line: the gross premium for the same coverage on the same person is the same regardless of who owns the policy. But the after-tax economics depend entirely on the structure. Nevada's no corporate or personal income tax simplifies this analysis at the state level.

Agents in our network can help Nevada business owners compare the after-tax economics of different coverage structures.