Life Insurance

Life Insurance for Business Owners

life insurance for small business owners
Life insurance offers security, and small business owners may find life insurance particularly useful as a financial safety net. Some insurance companies even sell specialized small business life insurance policies designed for this purpose. In addition, businesses can use a standard life insurance policy to protect themselves by naming the business as the policy beneficiary.

Can a business hold life insurance policies?

The business itself can't be insured with life insurance. However, the company can be financially protected through life insurance policies that cover owners, investors, or employees. Business owners can integrate life insurance policies tailored for small businesses, addressing the financial risks linked to the unfortunate passing of business owners or investors. Incorporating life insurance for small business owners is a strategic measure to help safeguard the business and its stakeholders in the face of unforeseen events.

Some companies offer specialized policies, like key person life insurance, which can help protect against loss if a key employee passes away. However, if structured correctly, even a standard personal life insurance policy can be used to safeguard your business. 

Why would a business purchase life insurance?

Businesses are often challenging endeavors that rely—at least in part—on loans, especially when the company is first formed. Life insurance can help small business owners protect against the risk that this debt represents. When business partners are co-owners, securing life insurance for small business owners can help to ensure financial protection in unforeseen circumstances.

In this situation, the policy payout may be used to purchase the deceased owner's share of the business, pay off debt, maintain operational costs, or cover other expenses. Even if your partner has a policy for you, you generally can still take out a separate one for yourself.

Can a business owner deduct life insurance premiums?

The short answer is yes. However, the reality is a bit more nuanced. If the policyholder passes away, business owners can deduct life insurance premiums on policies that have the business as a beneficiary and are intended for business purposes. However, suppose the policy is for the business owner's family to replace income, pay off debt, or cover other, non-business activities. In that case, it's not tax-deductible.

In the end, what matters is whether those premiums are a verifiable business expense or a personal one.

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Types of life insurance for business owners

Small business owners may want to consider two main categories of life insurance: personal and business. Both types of policies can help the business owner protect against financial risk. Personal life insurance can pay off debt or replace income if the policyholder passes away. 

The different types of business life insurance policies, like key person insurance, can provide the business with funds at a vulnerable time if a key individual within the company passes away or becomes disabled. 

Business life insurance planning

Life insurance strategies for business owners can cover a broad swath of financial risks. These risks can include everything from debt, to lost income, to the cost of operations or even business acquisitions. Planning your life insurance as a small business owner includes considering the costs that would impact your family or business if you were to pass away. It can be helpful to create a spreadsheet of expenses that you'd want to be covered if this were to happen.  

While it's uncomfortable to think about, planning can help ensure that your business and family are as financially well-protected as possible. If you have business partners, it can be beneficial to work together on some of these risks and to consider having life insurance policies for each other. 

Ethos life insurance

Ethos doesn't offer business life insurance, but individual life insurance policies are available for both term and whole life plans. While these are personal life insurance policies, policyholders can still use these policies for their families or business, depending on who they name as the beneficiaries. 

Listing your business as a beneficiary will make the premiums a business expense, so long as the payout is used for business expenses. Use the Ethos estimate tool to calculate coverage and see what would suit your needs. 

Ethos offers whole life policies to applicants between the ages of 66 and 85, with no health-based restrictions for acceptance. Term policies are available to applicants between the ages of 20 and 65. Ethos never requires a medical exam — simply answer some basic health questions.

Check your price for life insurance online with Ethos' free quote tool today.

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10 years
Please note that all prices quoted are subject to change, including due to underwriting.