IUL for Business Owners: Key Person, Buy-Sell, and Executive Bonus

Business owners buy permanent life insurance for reasons W-2 clients rarely do: to protect the enterprise, to fund a partnership exit, and to compensate key employees in a tax-efficient way. IUL fits all three.

The business owns the policy on a critical employee. Death benefit covers revenue disruption and recruiting costs; cash value builds an off-balance-sheet reserve the business can borrow against.

Cross-purchase or entity-purchase structures use IUL to fund the buyout of a partner's interest at death or disability. IUL's cash value growth is attractive when the exit is expected to be voluntary rather than triggered by death.

The business pays a bonus that funds an IUL owned by the executive. Deductible to the business, taxable to the executive, and the cash value belongs to the employee — a retention tool with real economics.