How much does an executive bonus life insurance plan cost in Nevada?

An executive bonus plan (Section 162 plan) cost depends on the size of the life insurance policy the employer chooses to fund for the executive, which in turn depends on the coverage goal and the executive's age and health.

Premium structure: the employer pays the permanent life insurance premium as additional compensation. Common approaches include: (1) funding a specific coverage amount (e.g., a $2,000,000 permanent policy on a 45-year-old executive); (2) funding a premium equal to a percentage of executive compensation (e.g., 5–10% of base salary); (3) using a fixed annual premium that the policy is designed around.

For a healthy 45-year-old Nevada executive, a $1,000,000 whole life policy might involve annual premiums of $15,000–$30,000/year (illustrative; actual premiums vary significantly by carrier, product, health status, and coverage amount). These premiums are deductible to the business as executive compensation and taxable income to the executive.

Net executive cost: the executive pays income tax on the premium received as compensation. The after-tax cost to the executive depends on their marginal tax rate. Nevada's no state income tax means the executive's after-tax cost is more favorable than in high-tax states.

Net business cost: after the tax deduction on the premium as compensation, the actual after-tax cost to the business is the gross premium multiplied by (1 minus the corporate tax rate). Agents in our network can help Nevada businesses model the after-tax economics of executive bonus plans.