A Look at Corporate Owned Life Insurance

Corporate owned life insurance is a type of life insurance policy that is owned by a company. When the employee dies, the benefits of the life insurance policy will go to the company. In most cases, this type of insurance is purchased in order to insure the lives of important people in a business. This is also sometimes referred to as key person life insurance.

Key Person Life Insurance

A company will take out this type of insurance in order to protect themselves against losing a person that is extremely valuable to the business. For example, if the president of a large company were to die, it would negatively affect the company for some time. The company would have to put a large amount of resources into training another individual to take over and learn how to do the job. For companies that rely on a few key individuals, this type of insurance can be extremely valuable. It could be the difference between the company going out of business and staying in business after an individual dies.


In the past, this type of insurance was abused by certain companies. These companies would take out life insurance policies on many of their employees without the knowledge of the employees. Then, when an employee of the company died, the employer would be able to get money. Even though the money from the profit from the policies was not very substantial, the companies could take a tax deduction on the amount of the premiums and save money on taxes. When the government realized that this was happening, they imposed strict standards for businesses that want to use this type of insurance. Now, regular employees are generally not covered by corporate owned life insurance.


When a company wants to take out life insurance on an employee, several things have to happen. First, the company has to provide a written statement to the employee that says they want to take a life insurance policy on them. Then, the person that is going to be insured has to sign a document that says they do not mind if the company takes out a life insurance policy on them. In addition, the individual has to be aware that the corporation is going to be the beneficiary of the life insurance policy. If the individual does not wish to have a life insurance policy taken out on them, they can refuse to accept the offer by the employer without any negative consequences.

The employee should have their own life insurance policy to fund their family because none of the proceeds will be provided to anyone other than the company.


Many times, companies will be able to purchase a life insurance policy and get a discount because they do a great deal of business with an insurance company. Sometimes, the same company that provides health insurance or other benefits will also have a life insurance policy that is available. Talk with your insurance agent for more information.

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