Safeguard Your Business’s Future and Financial Stability
Business-Owned Life Insurance
Business-Owned Life Insurance provides critical protection against the financial impact of losing key personnel while creating tax-advantaged investment opportunities. Our customized solutions help businesses maintain continuity and protect both owners and employees during unexpected transitions.
Customer Testimonials
Business-Owned Life Insurance Services
Business owned life insurance is a strategic financial tool that allows companies to protect themselves against the economic loss that can occur when a vital team member passes away. These policies enable your business to remain financially stable during transitions, fund buy-sell agreements, and provide liquidity when it’s needed most. Beyond basic coverage, business owned life insurance creates a valuable asset on your company’s balance sheet, potentially improving your financial ratios and borrowing capacity while simultaneously creating a tax-advantaged reserve that can be accessed if needed for future business opportunities or challenges.
Our business owned life insurance solutions are tailored to your company’s specific structure, size, and industry needs. We create customized plans that balance immediate protection with long-term cash value accumulation, all while optimizing the tax advantages available through various policy structures. Through careful analysis of your organizational structure, financial objectives, and potential vulnerabilities, we design coverage strategies that address both known risks and potential contingencies. Our approach integrates business owned life insurance with your broader business continuation planning, creating coordinated protection that activates seamlessly when needed. We help you navigate complex regulatory requirements surrounding company-owned policies, ensuring full compliance with notice and consent provisions while maximizing the financial benefits available to your organization.
Business Continuity Protection
Ensure your company can withstand financial challenges after the loss of a key person by providing immediate liquidity.
Tax-Advantaged Asset
Withdrawals from a cash value policy that is not a modified endowment contract are generally taxed only above the investment in the contract (IRC 72(e)). For an employer-owned policy issued after August 17, 2006, the death benefit is income-tax-free above the premiums paid only if IRC 101(j) notice-and-consent rules are met and an exception applies. Consult your tax advisor.
Buy-Sell Funding
Create a funded mechanism for business succession that activates exactly when needed without depleting operational cash.
Talent Retention
Offer enhanced benefits packages that demonstrate long-term commitment to valued executives and employees.
Creditor Protection
Shield business assets with insurance products that typically offer protection from business creditors.
Business-Owned Life Insurance Business Case Studies
How Business Owned Life Insurance Saved a Manufacturing Company
Preserved operations after sudden loss of founder:
- Provided $2M immediate liquidity
- Funded successor's buy-out of heirs
- Prevented forced sale of assets
- Maintained customer relationships
- Preserved jobs for 75 employees
Professional Services Firm Secures Partnership Transitions
Established structured ownership transfers through insurance:
- Created clear succession pathway
- Protected company valuation
- Minimized transition tax burden
- Guaranteed fair value to departing partners
- Maintained client confidence during changes
Family Business Ensures Multi-Generation Stability
Structured ownership transfer without financial strain:
- Equalized inheritance among family members
- Provided liquidity for estate taxes
- Prevented forced asset liquidation
- Maintained operational continuity
- Preserved family business legacy
Business-Owned Life Insurance
Frequently Asked Questions (FAQs)
What is Business-Owned Life Insurance (BOLI)?
Business-owned life insurance (BOLI) is life insurance that a company owns on the life of an owner, executive or other employee, with the company as a beneficiary. When the insured is an employee on the date the policy is issued, federal tax law treats it as an “employer-owned life insurance contract” under Internal Revenue Code (IRC) section 101(j), which has its own tax and notice-and-consent rules. Commercial Finance Partners offers business-owned life insurance as one of its insurance services.
How does Business-Owned Life Insurance benefit my company?
BOLI pays a death benefit to the company when the insured person dies. Cash value policies, such as whole life and universal life, also have savings features that let the policy owner get money from the policy while the insured is alive. A company can use the proceeds to fund a buy-sell agreement; in Connelly v. United States (2024), a corporation bought life insurance on each of its two owners to fund a possible redemption of a deceased owner’s shares.
How can Business-Owned Life Insurance help with debts and expenses?
When the insured dies, the death benefit is paid to the company as beneficiary, and the proceeds become a company asset that can be applied to obligations such as debts and operating expenses. If the policy has been collaterally assigned to a lender, as SBA rules require for some loans, the lender is named as the policy’s assignee. How much of the payout is income-tax-free depends on the IRC 101(j) rules; ask your tax advisor.
Does Business-Owned Life Insurance build cash value?
Only if it is a cash value policy. Whole life, universal life and variable life policies have cash value, while most term policies have none, and in some cash value policies the values are low in the early years and build later. Under IRC 72(e), money withdrawn from a policy that is not a modified endowment contract is generally taxable only to the extent it exceeds the investment in the contract, which is the premiums paid minus earlier tax-free amounts received. Ask your tax advisor.
How can Business-Owned Life Insurance help with business partners and lenders?
Company-owned life insurance can fund an agreement among business partners to buy out an owner who dies. In Connelly v. United States (2024), a corporation used $3 million of life-insurance proceeds to redeem a deceased owner’s shares, and the Supreme Court held that proceeds committed to that redemption still count toward the company’s value for federal estate tax. Some lenders require coverage: SBA rules can require life insurance on a principal when a loan is not fully secured.
Is Business-Owned Life Insurance affordable for my company?
Cost depends on the policy and the person insured. The insured’s health can affect both approval and the premium, and premiums for many policies are sensitive to the insurer’s investment earnings, claim costs and other expenses. Term policies are intended as lower-cost coverage for a specific period, while cash value policies can be kept as long as needed. A company generally cannot deduct premiums on a policy under which it is directly or indirectly a beneficiary (IRC 264(a)).
Who should be insured under a Business-Owned Life Insurance policy?
The company chooses whom to insure, but tax law shapes the choice. For an employer-owned policy’s death benefit to stay income-tax-free above the premiums paid, the employee must receive written notice and give written consent before the policy is issued, and the insured must generally have been an employee within the 12 months before death or, when the policy was issued, a director or highly compensated employee (IRC 101(j)). The policyholder also needs an insurable interest in the insured.
How is the payout from Business-Owned Life Insurance used?
The company receives the death benefit as beneficiary and decides how to use it. Proceeds can fund the purchase of a deceased owner’s shares: in Connelly v. United States (2024), a corporation used $3 million of life-insurance proceeds to redeem a deceased shareholder’s stock. For federal estate tax, proceeds payable to a corporation are an asset that increases its fair market value. Whether the payout is taxable income to the company depends on IRC 101(j); consult your tax advisor.
How is Business-Owned Life Insurance tailored to my company’s needs?
The main choices are who is insured, the amount of coverage and the type of policy. Term policies cover a set period, such as 10 or 20 years, while cash value policies can be kept as long as needed. Under IRC 101(j), the written notice to an insured employee must state the maximum face amount before the policy is issued. Commercial Finance Partners tailors its business-owned life insurance to a company’s structure, size and industry.
Is Business-Owned Life Insurance a good investment for my company?
That depends on your company’s goals, costs and tax position. Before buying, the National Association of Insurance Commissioners suggests asking which parts of the premium or policy value are not guaranteed and requesting an illustration of future values. Premiums are generally not deductible when the company is a beneficiary (IRC 264), and IRC 101(j) can make part of the death benefit taxable. A company that owns employer-owned policies reports them each year on IRS Form 8925. Consult your tax advisor.
The importance of
Business-Owned Life Insurance
Why Choose Commercial Finance Partners:
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We specialize exclusively in business financial solutions tailored to your company’s specific needs.✦
Our advisors have extensive experience with businesses in your industry sector.✦
We offer ongoing policy review and adjustment as your business evolves.✦
Our comprehensive approach integrates life insurance with your broader business succession strategy.✦
We prioritize clear communication, ensuring you fully understand all aspects of your policy.
Related strategies from Commercial Finance Partners: keyman term life insurance, business succession planning and life insurance for SBA loans. See all of our business insurance services, or compare SBA loans for financing your business.
The financing solutions provided by Commercial Finance Partners were exactly what I needed. Their team was professional and helped me every step of the way
Matthew Rodriguez Business Owner