Business owners
Can my LLC pay for my life insurance? Who should own the policy?
Yes, a business can pay for or own life insurance, but who pays, who owns and who gets the money are three separate decisions.
The policy’s purpose and how your business is taxed decide how the premiums should be treated, and your CPA should confirm it before the next payment.
Who this is for
- LLC members and shareholders whose company pays (or could pay) their premiums
- Owners whose operating agreement requires life insurance
- Anyone who isn’t sure how past premium payments were recorded
Paying through the business doesn’t make it deductible
Under IRC §264, premiums generally aren’t deductible when the taxpayer is directly or indirectly a beneficiary of the policy. A business purpose alone doesn’t change that.
If the business owns a policy on an employee or owner, the employer-owned life insurance rules (IRC §101(j)) can also apply. Our key person page covers the notice and consent steps.
“LLC” isn’t a tax classification
An LLC can be taxed as a sole proprietorship, partnership, S corporation or C corporation. The tax answer for business-paid premiums depends on that classification and on whether the payment is treated as compensation, a distribution, or something else. That’s a CPA decision.
Watch for three different people in three roles
When the owner, the insured and the beneficiary are three different people, the death benefit can be treated as a gift from the owner to the beneficiary. Planners call this the “Goodman triangle.” Whether it applies depends on the actual parties and rights, so have your CPA review any arrangement where the three roles are split.
The six-field ownership worksheet
Fill this in for every policy. If you can’t answer a line, that’s the first question for your CPA.
| Field | Your answer |
|---|---|
| Insured | |
| Owner | |
| Premium payer | |
| Beneficiary | |
| Purpose (family, buy-sell, key person, benefit) | |
| Business tax classification |
What to bring to the review
- Your entity’s tax classification
- Ownership records and operating or shareholder agreement
- Policy schedules for each policy
- Premium payment history and how it was recorded
- Compensation or distribution records
Mistakes that cost people later
- × Treating “LLC” as a tax classification.
- × Assuming business payment means business ownership.
- × Assuming income-tax treatment of the death benefit settles estate or gift tax treatment.
- × Transferring a policy without checking valuation and transfer rules.
- × Applying a “Goodman triangle” rule automatically without looking at the actual parties.
Questions people ask
Can my LLC pay my life insurance premiums?+
It can, but how the payment is treated depends on the LLC’s tax classification and whether it’s compensation or a distribution. Ask your CPA.
Does paying through the business make it deductible?+
Generally not when you or the business is a beneficiary (IRC §264). A business purpose alone doesn’t create a deduction.
Should my company own the policy or just pay for it?+
It depends on the purpose. Buy-sell and key person coverage often belong to the business; family protection usually doesn’t.
Does it matter that my LLC is taxed as an S corporation?+
Yes. Tax treatment differs by classification, so your CPA needs to confirm the answer for your entity.
Can my spouse receive the death benefit if the company pays?+
Often yes, but the structure can change the tax result. Map owner, payer and beneficiary first.
What is the life insurance Goodman triangle?+
When owner, insured and beneficiary are three different people, the death benefit can be treated as a gift from the owner to the beneficiary. Have your CPA review any split arrangement.
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Kevin Brown, licensed New Jersey insurance producer (#3003694894)
Kevin Brown Insurance Agency, South Plainfield, NJ. You work with Kevin directly on every life case. Updated November 2026.
Coverage, policy features, premiums and underwriting requirements depend on the insurer, product, applicant and state availability. Approval is not guaranteed. Illustrations are not promises of future performance. Kevin Brown Insurance Agency does not provide medical, legal or tax advice. Consult your attorney or CPA about your circumstances.