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?
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.
