Are Life Insurance Premiums Tax Deductible?

A life insurance premium is your payment toward the cost of life insurance. An insurance provider can allow you pay your premiums monthly, quarterly, semi-annually, or yearly. But if like many people you are on a budget, how can you save money on life insurance premiums? Are life insurance premiums tax deductible?

Are Life Insurance Premiums Tax Deductible?

Dictionary definition of tax deductible - for life insurance premiums information

Generally, life insurance premiums are not deductible. The government views life insurance premiums as a personal expense—not a medical expense—so in most cases, you cannot include them in your deductions for taxable income. But at times, such as a business expense, your premiums may be tax deductible.

The IRS says that life insurance premiums are not deductible because they are not a medical expense that is “used primarily to prevent or alleviate a physical or mental disability or illness.” For information on what types of premiums are tax deductible, refer to Internal Revenue Service Publication 502, Medical and Dental Expenses.

What Are the Exceptions for Tax-Deductible Life Insurance Premiums?

  • Life insurance purchased to secure alimony payments – If you purchase life insurance to ensure your surviving ex-spouse will receive continued financial support, the premiums may be tax deductible.
  • Life insurance gifted to a charity – When a life insurance policy is gifted to a charity, a portion of the premiums may be tax deductible. For details, see an article published by the Planned Giving Design Center on charitable gifts of life insurance.
  • Life insurance purchased by a business – A business may purchase life insurance for its officers or employees. The life insurance premiums may be tax deductible if the business is not a direct or indirect beneficiary.

If you think your life insurance policy may be tax-deductible, contact a tax advisor for an accurate evaluation. For additional information on life insurance and taxes, read out post Is Life Insurance Taxable?

Do You Want to Save Money on Life Insurance Premiums?

If you want to save money on life insurance, the Life Insurance Institute discourages looking for the lowest premium. A low premium can lead to buying the wrong benefits or not having enough coverage for your survivors.

Factors to focus on:

  • Investigate the history and reliability of the insurance provider
  • Consider group life insurance through your employer
  • Ensure you are in good health to get better rates
  • Compare prices from multiple insurance agents
  • Determine if term insurance might be right for you

Where Can You Get Advice About Life Insurance Premiums?

You can get personalized advice about life insurance premiums by talking with an agent. In Raleigh, NC, John Hunt of Hunt Insurance can help. Call us for a free consultation and to ask about pricing.

What Life Insurance Is Best?

Forty-six percent of people living in the U.S. do not have life insurance. And one of the top reasons they do not have it is not knowing which insurance to get. If you are comparing life insurance companies and policies, how do you know which life insurance is best for your needs?

Which Life Insurance Company Is Best?

Young Asian mom and duagher looking at a computer

The best life insurance companies offer resources to help you understand your policy and when you need to adjust it. A stable life insurance company has a long, reliable history of providing policies and paying out death benefits.

Although many life insurance companies use names that convey strength, the Insurance Information Institute recommends verifying the company’s full name, location, and affiliation with other companies.

Also, research to find these facts about a company:

  • Identity
  • Reputation
  • Ethics
  • Financial status
  • Product range

What is the quality of customer service?

Choose an insurance company that makes it easy to learn about the types of life insurance policies available and get help understanding them.

Look for these services:

  • A comprehensive selection of policies
  • Online articles and educational resources
  • Online insurance calculators
  • Accessible, knowledgeable, personalized customer service

What Is the Best Life Insurance Policy for You?

The best life insurance satisfies your reasons for purchasing a policy. Find a policy that fits your budget and offers enough coverage to care for your surviving dependents. The National Association of Insurance Commissioners advises that you select a policy that provides enough coverage based on your age and financial responsibilities.

Look for a plan that offers enough coverage to satisfy your potential needs:

  • Replace up to ten times your income
  • Pay off debt
  • Care for aging parents or disabled dependents
  • Pay for children’s education

Term or permanent life insurance?

Term life insurance is in effect for a limited period, or term. Terms are set in increments of five (5, 10, 15 years, etc.) and can last up to 30 years. A whole life insurance policy lasts your entire life and builds cash value over time.

Before you purchase an insurance policy, ensure it fits your needs based on these factors:

  • Your age
  • The policy type and features
  • The amount of insurance you are purchasing
  • Cost of premiums

Many insurance policies offer riders—add-ons to enhance your policy. But riders will increase your premiums. Please read the post, Term Life vs. Whole Life Insurance – How to Decide for a comparison of term and whole life insurance.

In Raleigh, John Hunt of Hunt Insurance offers personalized assistance to help you identify an insurance policy that fits your needs and budget. Contact Hunt Insurance by phone or e-mail to request a consultation and a customized quote.