For normal people, payments of insurance premiums are definitely a matter of expense. However, business firms on the other hand may not consider paying the life insurance premiums as a huge expense. One of the most common questions asked about life insurance premiums is that “Are life insurance premiums tax deductible?” Well, going through the different factors below will let us know more about the same.
Types of payments
Unlike ordinary way of premium payments, business firms choose two ways for paying life insurance premiums. The initial step of a company is to own a policy and to pay the premium on the same. In such a case, you cannot find tax deduction on the policy. Although they are business expenses, they are never treated as an expense at all. If the policy is taken by an employee and if the premium for the same is paid by the company, this will be treated as an expense of the company and the same will be deducted from the income of the business.
Importance of paying premiums
The main intention of any business paying premiums of life insurance is a way to offer benefit for an employee. Since business firms consider employees as their assets, they wish the employee to offer them their valuable service. Thus, employees get such benefits from the firm as they are treated as a valuable part of their firm. If the business owns the insurance policy, the employee could also get life insurance as pension.
Uses of paying premiums
Payment of insurance premiums by the business firm will help to ensure tax deduction. In this way, the gross income earned by a business gets reduced and this will also lower the tax due.
Demerits of paying premiums
If an employee owns a policy, the business will never control the policy owned by him. Thus, the chance of deducting premiums from gross income will not be enjoyed by the business firm if it owns a business policy.
To the question “Are life insurance premiums tax deductible?”, the companies should initially decide whether or not to take control over an insurance policy. In both these circumstances, the employee can enjoy high benefits. The decision is all left to the business firms. They can either pay or not pay premiums for life insurance policies.