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Can life Insurance Be Claimed as a Business Expense?
When it comes to buying life insurance for your employees, it may be an ideal way for you to provide them with a benefit they appreciate, but it also provides a way for you to potentially reduce your taxes. As a business, you may also need to consider the investment in life insurance to help you cover the costs associated with losing an important member of your leadership team. Here is what you need to know about providing life insurance to your employees and when it can become a business expense.
When Can You Business Expense Life Insurance?
Businesses may be able to deduct the cost of life insurance deductibles in some situations. One situation involves providing employees with a life insurance policy as a benefit. Much like providing them with access to a retirement account or health insurance, providing a life insurance policy allows you to offer your employees a benefit they desire. And, in addition to this, you may be able to write off that cost on your business taxes during that tax year. This is applicable in situations where other benefits you offer – including health insurance – are tax deductible. In all situations, you should work with a tax professional to determine how to offer the proper coverage to qualify for a business deduction.
What Is Key Man Insurance?
Another important consideration is called key man insurance. This is a type of life insurance policy you, as the business, takes out on an important member of your company. This may be the owner, founder, CEO, or other upper leadership positions. It can also be a person working for you that has skills that are very hard to replace. By taking out this policy, you are able to safeguard the company against their loss. If the person dies unexpectedly while employed by you and with your life insurance in place, the policy will pay you, the business, a set amount of money. Those funds can then be used to help you to fill in the talent gap or to find a new employee to do the work.
How to Manage the Life Insurance Deductible
If you have the desire to offer your employees a life insurance policy, it is important to consider the options available to you. Your company will pay a premium for the coverage, but purchasing it as a part of a group plan – which may cover all of your employees – can keep the costs lower. You can choose the amount of coverage you wish to provide. If you hope to keep the costs lower, consider a lower death benefit. You can also work with your life insurance company to offer policies tailored to the needs of your employees based on their health and age.
Can You Purchase from Final Expense Insurance Companies for Employees?
Final expense life insurance is a type of coverage that offers a very basic level of coverage at the time of death. It generally can help to pay for your employee’s final expenses. You can purchase this type of coverage for your employees, but it is likely to be harder to expense within the business as a covered benefit. For this reason, many companies elect to purchase life insurance policies, such as term life insurance policies, for their employees that offer the employee the ability to use the funds for their needs.
Term Life insurance Rates – Keeping Company Costs Low
As a business owner, you have several options to keep term life insurance rates for employee policies low. First, be sure to consider offering policies to employees at a young age. The younger they are, the more affordable the policy will be to them. Second, consider life insurance policies that have split payments where your company pays for a portion of the cost and the employee pays for a portion of it. This can help to keep the costs of providing life insurance for your employees more affordable overall. Many times, life insurance policies can be a tax deduction as a result, but they can also be a big benefit to the family you are offering to help protect, too.
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