I get this question a lot… especially when talking about Commercial Life Insurance
Is life insurance always tax free?
No, but usually is
Is the premium deductible for a business?
No for the most part, but sometimes it is.
Here’s where agents get tripped up:
✔ Death benefit: generally income tax free ✘ Premiums: generally not deductible if the payer benefits (§264)
Where “tax free” gets complicated: → Policy sold for value → Employer-owned policies without notice and consent (§101(j)) → Estate tax over the 2026 $15M exemption → Cash value gains on surrender or MEC
Where a business can deduct: an executive bonus plan where the employee owns the policy (taxable to the executive).
Three questions I ask on every case: Who owns it? Who benefits? Who signed off?
New Agent Education Series episode and slides: Get the Slides