Executive Bonus Life Insurance
Executive bonus life insurance is a strategy where a business may help pay for a life insurance policy for a key employee or owner as an added benefit.
How this coverage works
The employee owns the policy. The business pays the premium, or bonuses the employee the money to pay it. The employee keeps the policy whether or not they stay.
It is simple, which is its main advantage over more elaborate executive benefit structures. It is also compensation, and it is treated as such.
Who this coverage may be good for
- Business owners rewarding themselves or a partner.
- Executives and key employees a business wants to retain.
What to consider before choosing it
- This should be coordinated with tax professionals before it is implemented.
- The employee owns the policy, so retention value is indirect.
- Bonusing the tax as well as the premium is a common refinement worth discussing.
Common questions
Who owns the policy?
The employee. That is what distinguishes it from key person coverage, and it is why the retention benefit is softer than it looks.
Is the bonus taxable?
Generally the bonus is compensation to the employee. Tax treatment varies and should be confirmed with a tax professional, not with me.
What if the employee leaves?
They take the policy. Some arrangements add restrictions. Those add complexity and legal review along with them.
Coverage availability, benefits, riders, and underwriting requirements vary by carrier, product, state, and individual eligibility. This page is for general educational purposes and is not a guarantee of coverage.