Your business can usually write the check, but that is different from getting a deduction. Premiums on your own personal coverage are a personal expense for sole proprietors, single-member LLCs and partners. An S corporation can pay and treat the premium as wages for a more-than-2% owner (deductible to the company, taxable to you). A C corporation can pay it as a bonus or provide group term life, where the first $50,000 is tax-free to employees (if the plan does not favor key employees, a group that includes owners of more than 5%). When the business is the beneficiary, premiums are not deductible for anyone.
We are licensed insurance brokers, not CPAs or attorneys. Treat the tax and legal points on this page as general education, and confirm them with your own CPA or attorney before acting.
On this page
The one principle behind every answer
Life insurance taxes follow who benefits. If the policy protects the business (key person, entity-owned buy-sell), the premium is not deductible under Section 264 and the death benefit is generally tax-free to the business. If the policy protects your family, the premium is either a personal expense or compensation to you. Compensation is deductible to the business and taxable to you, which often nets out close to zero for an owner.
That is why "can my business pay for my life insurance" really means "is there a deduction," and the answer depends on how your business is taxed.
By entity type
| Business type | Personal policy on the owner, family as beneficiary | Group term life covering the owner |
|---|---|---|
| Sole proprietor or single-member LLC (disregarded) | Business can pay, but it is a personal expense: not deductible | The owner is not an employee, so no Section 79 exclusion for the owner |
| Partnership or multi-member LLC | Can pay, but treated as a distribution or a guaranteed payment; either way the partner bears the tax, so no net savings | Partners are not employees for Section 79; employees can be covered |
| S corporation, owner with more than 2% | Can pay as wages: deductible to the S corp, included in the owner's W-2 wages | Allowed, but the full cost is included in the owner's wages (no $50,000 exclusion) |
| C corporation, owner-employee | Can pay as a Section 162 bonus: deductible as reasonable compensation, taxable to the owner | Allowed; the first $50,000 is excluded from the owner's income if the plan does not favor key employees (owners of more than 5% are key employees) |
Two practical notes. First, "deductible to the business and taxable to you" is not a wash if you are in a lower bracket than the business or if payroll taxes apply, so your CPA should model it. Second, running personal premiums through the business without treating them as wages or distributions is the version that gets owners in trouble at audit.
C corporation owners have the most options
Owners who are employees of their C corporation can use the same tools as any other employee:
- Group term life: the corporation deducts the premium and the first $50,000 of coverage is tax-free to you, as long as the plan does not favor key employees in eligibility or benefits (owners of more than 5% count as key employees, so the plan design matters). Coverage above that creates a small amount of imputed income; see group term life imputed income.
- Section 162 executive bonus: the corporation pays a bonus that covers the premium on a policy you own. Deductible to the corporation as reasonable compensation, taxable to you. See Section 162 bonus plans.
- Split dollar: the corporation and the owner share the cost and the benefits under a written agreement, taxed under special regulations. See split dollar in plain English.
S corporation owners
More-than-2% shareholders of an S corporation are treated like partners for fringe benefits. The company can still pay for your life insurance, but it goes on your W-2 as wages. Our S corp owner life insurance guide covers payroll treatment, basis and buy-sell planning for S corps.
When the business needs the policy itself
Separate from your personal coverage, your business may need its own policies:
- Key person coverage on you or an employee, owned by and payable to the business. See key person insurance.
- Buy-sell coverage so the other owners can buy your share from your family. See cross-purchase vs entity redemption.
- Loan coverage assigned to a lender. See SBA loan life insurance.
None of those premiums are deductible, but each protects the business in a way your personal policy does not.
Frequently asked questions
Can I deduct life insurance as a self-employed person?
No. Premiums on a policy covering your own life are a personal expense for sole proprietors and single-member LLC owners, even when paid from the business account. Unlike health insurance, there is no self-employed life insurance deduction.
Can my LLC pay for my term life insurance?
It can pay the bill, but the tax treatment follows how the LLC is taxed. A single-member LLC treats it as a personal expense. A multi-member LLC taxed as a partnership treats it as a distribution or a guaranteed payment to you. An LLC taxed as an S or C corporation follows the corporate rules above.
Is it better to own my life insurance personally or through my company?
For coverage that protects your family, owning it personally (or in a trust) is usually cleaner: the death benefit goes straight to your family and stays out of company creditors' reach. Company ownership makes sense when the company is the one that needs the money.
Start your life insurance request
Tell us what the coverage is for and who it would cover. For most requests we ask for each person's date of birth and sex so Erik can prepare for the call. We do not ask health or tobacco questions in this initial request. This is a request for help, not an insurance application or a promise of coverage.
Written by Erik Moran
Erik co-owns Moran Insurance Group with Amanda Moran and handles the agency's life insurance cases, from key person and buy-sell coverage to trust-owned policies. He works alongside clients' CPAs and attorneys, who make the tax and legal calls. More about Erik.
Sources
Moran Insurance Group is a licensed insurance agency. Our brokers are not CPAs, attorneys or tax advisors, and nothing on this page is tax, legal or investment advice. Tax figures and rules reflect our understanding as of October 2026 and can change. Coverage is subject to carrier underwriting and state availability. Confirm anything tax or legal with a licensed CPA or attorney before you act on it.