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Employers can bonus money and other cash equivalents to employees. One cash equivalent is inexpensive term life insurance. If the employee dies, the beneficiary receives the insurance tax free. But what if the employee doesn’t die?


Term Life + Cash is an inexpensive way to offer a great benefit to a key employee. The definition of “key” is in the hands of the employer —it can be the employer himself (in C Corporations), a secretary, a manager, a relative working at the company—any employee the employer chooses.

Case Study

  • John is a key sales manager at Loosen Up Manufacturing, Inc. (Loosen Up)
  • He’s 45 years old and is in good health,
  • Loosen Up buys a $1 million 20-Year Return of Premium term policy for John,
  • John names Jane, his wife, as the beneficiary,
  • Loosen Up pays, and deducts, the premium of $3,880 every year for 20 years,
  • John reports the $3,880 as taxable income and pays $1,164 in taxes each year (30% tax bracket),
  • If John dies, $1 million insurance benefit is paid to Jane tax-free,
  • If John lives, at the end of the 20th year, the total premiums paid by Loosen Up are returned to John,
  • Total taxes paid by John on the employer-paid premiums = $23,280 ($1,164 x 20),
  • Total return-of-premiums payable to John (income tax free) = $77,600 ($3,880 x 20),
  • Tax-free Rates Return in 20 years is 10.45% ($1,164 paid in for taxes for 20 years; $77,600 received as return-of-premium).

Here’s how it works.

  • Employer chooses the term life plan and the term period,
  • Employee owns the policy and names the beneficiary,
  • Employer-paid premiums are deductible by the company,
  • Employer-paid premiums are includible by the employee as income,
  • If the employee dies, the life insurance proceeds are paid to the beneficiary, tax free,
  • If the employee doesn’t die, premiums are refunded to the employee, tax free.


Inexpensive. Efficient. Tax Advantaged.


For producer education only; not for use with the public.