Executives have unique needs and wants when it comes to benefits, so it makes sense that tailoring benefits packages to the needs of executive teams can help increase retention of key talent. Executive life insurance can be particularly helpful because it can be customized in ways to protect both the executive and the company, and even serve as a form of deferred compensation.
Key takeaways:
Executive life insurance is a category of life insurance benefits businesses use to attract, reward, retain, or protect against the loss of key executives.
Depending on the design, the policy can be owned by the company — often to fund programs such as a supplemental executive retirement plan (SERP) or deferred compensation — or by the executive as a portable benefit they retain if they leave.
Common structures include executive bonus (Section 162) plans, split-dollar arrangements, corporate-owned life insurance (COLI) used to fund supplemental retirement plans, and key person coverage.
Standard group life coverage usually caps well below what highly compensated employees need, which is why employers use supplemental executive coverage to close the gap.
Executive life is one of the three main components of an executive benefits package; the others are executive disability and supplemental/executive retirement.
What is executive life insurance?
Executive life insurance is a category of life insurance policies that businesses use to attract, retain, and protect against the loss of key executives. Depending on the specific policy arrangement, the policy may be owned by the company or by the executive directly.
The term “executive life insurance” is an umbrella term that can refer to several distinct plan structures. It’s not a singular product or service, like term or whole life insurance. Rather, it can be virtually any type of policy structured specifically to protect a company’s key personnel.
Executive life insurance has two primary ownership structures
Corporate-owned | Individually owned |
|---|---|
Used primarily to protect the company against the unexpected loss of a key employee. With this structure, the policy beneficiary is the company itself, rather than the employee’s family (though the employee may have a separate policy as well). Corporate-owned life insurance may also be used to fund certain executive benefits such as deferred compensation. | Used primarily to protect the employee’s family from the financial strain that their passing may cause. The key employee or executive owns the policy and can designate beneficiaries (usually a spouse or children). |
Why executives are often underinsured by standard coverage
Many companies offer life insurance as part of a standard group benefits package for all employees. However, standard group life insurance policies generally have benefit caps far below what a high-net-worth family needs for estate planning. According to Investopedia, many group life plans have benefit caps of around $20,000–$50,000, or one or two times the employee’s salary.1
This can leave executives underinsured — if they unexpectedly pass away, it could leave the family members who depend on their income woefully unprepared. While some may have individual life insurance policies, overall ownership of such plans is on the decline. In 2011, 63% of Americans had life insurance, while by 2023 that figure was only 52%.2
At a time when 40% of American adults believe they need more life insurance, companies that offer supplemental executive life insurance coverage can differentiate themselves by helping protect executives against a key personal finance vulnerability.3
How executive life fits within an executive benefits strategy
The fact is that highly compensated employees still experience financial anxiety about their future — and particularly about their families. Many worry that should they pass away or become unable to work, their family wouldn’t be able to maintain their lifestyle. That’s why executive compensation packages often include life insurance, executive disability insurance, and enhanced retirement benefits, along with tertiary benefits like financial counseling.
Competitive benefits packages for the broad employee population will usually include some type of life insurance, but high-earning personnel need executive life insurance specifically designed to protect their finances. Individually owned executive life insurance policies with appropriate levels of coverage can help reassure executives that their family’s lifestyle will be financially sustainable in the event of their passing.
In a 2026 survey, 41% of working Americans were concerned that their retirement savings wouldn’t last, and 401(k) limits don’t allow highly compensated individuals to build enough savings to support their lifestyles.4,5 Permanent whole and universal executive policies build cash value, an asset that can further their retirement by serving as a form of deferred compensation.
The core plan types at a glance
Plan type | Purpose | How it works |
|---|---|---|
Executive bonus (Section 162) plan | Reward and retain key executives | The company provides large bonuses to an employee in order to cover premiums on a whole life insurance policy that is owned by the executive. Premiums are generally taxable compensation to the employee and tax-deductible by the employer. |
Split-dollar life insurance | Share policy costs and benefits | The company and the employee split the premiums, cash value, and/or death benefit under a formal agreement. |
COLI funding a SERP/deferred compensation | Informally finance future benefit obligations | The company owns a corporate-owned life insurance (COLI) policy and offers a supplemental executive retirement plan (SERP) to the employee. The cash value and death benefits of the policy help offset the cost of the retirement benefit. |
Variable life insurance | Permanent life insurance with investment potential | The company pays premiums for a life insurance policy that features a cash value component. The cash value is invested in separate investment accounts and can fluctuate with market performance. These policies also offer a separate death benefit. |
Term life insurance | Temporary death benefit protection | The company or employee pays premiums for a term life insurance policy with no cash value component and a specific term (often 10–30 years) of coverage. |
Key person coverage | Protect the business from losing a critical employee and aid in succession planning | The company owns the policy, pays the premiums, and is the beneficiary. Death proceeds help cover financial losses, recruitment costs, debt repayment, or business continuity should the key employee pass away. |
Corporate-owned versus individually owned: Who owns the policy?
With executive life insurance policies, the executive is generally the insured. This means that their life is insured under the policy. However, they may or may not be the policyholder (the person or entity that pays for and owns the policy) — it might be the executive, or the company itself. And the beneficiary (who receives the death benefit when the insured passes away) may be the executive’s family or their employer.
Corporate-owned policy | Individually owned policy | |
|---|---|---|
Ownership | Owned fully by the employing company | Owned fully by the individual (the insured executive) |
Beneficiary | Typically the employing company | The executive’s designated beneficiary (usually a family member) |
Payment of premiums | Company pays | Executive pays, or company may cover some or all of the premiums as a benefit |
Portability if the executive leaves the company | Company can generally keep the policy in force or surrender it for cash value | Often stays with the executive, though they may have to cover the premium cost |
Primary purpose | To protect the company from financial loss and/or to pay for employee benefits | To attract and retain key employees by providing them a benefit |
Cash value component | Company maintains ownership of the cash value assets, generally even if the employee leaves | Executive generally owns the cash value component |
Tax treatment overview
While each individual’s tax situation differs, there are some general tax implications to be aware of when it comes to executive life insurance.
For the business, many life insurance policy costs will be tax-deductible as a business expense — but not all.
For individually owned policies in which the employer makes the premium payments, those premiums are generally treated as taxable compensation to the executive.
SERP arrangements have distinct tax treatment. In some cases, payroll taxes may be due when the plan is vested, rather than when the benefits are actually paid out. For the employee, benefits are taxed as ordinary income once drawn upon in retirement.
COLI arrangements allow for tax-deferred growth of the cash value component, and the death benefit is often income tax-free if statutory requirements are met.
Split-dollar arrangements can fall into two distinct categories depending on who owns the policy, affecting their tax treatment.
It’s important to consult with your accounting professional to fully understand executive life insurance tax obligations and ensure IRS compliance.
How executive life plans are underwritten
How difficult is it to set up an executive life insurance plan? It’s often simpler than one might expect, with many policies designed specifically to minimize administrative burden for the purchasing company.
Policies are available with or without medical underwriting, and very few require any medical examination. If health questions are involved, they are most often a simple health questionnaire.
Most executive policies are available in one of two underwriting categories
Guaranteed Issue (GI) | Simplified Issue (SI) |
|---|---|
With Guaranteed Issue, eligible executives can obtain coverage without medical underwriting, meaning no medical exam, tests, or health questionnaires. Policy amounts are generally lower for Guaranteed Issue plans. | With Simplified Issue, executives will need to complete a short health questionnaire and answer questions about lifestyle and medical history. They are usually not required to undergo a medical exam or laboratory testing. |
Choosing a carrier for a multi-decade commitment
Guardian is one of the largest insurers in America, with continuous operation dating back to 1860. With a wide product selection, transparent pricing, and a nationwide network of financial advisors to serve you, Guardian is a carrier you can trust.
Take the next step
Executive life insurance plans are a long-term commitment, often spanning multiple decades. So employers should take care and consider an insurer’s reputation, longevity, financial ratings, and cost structure. Mutuality — an insurer owned by its policyholders, rather than shareholders — is also something many customers look for. Most importantly, you also need to find a provider with significant executive life insurance expertise, a broad product selection, and a willingness to tailor solutions to the very specific needs of your business. Those are all good reasons to consider Guardian.
To learn more about how we can help, speak with your broker or Guardian advisor, or connect with a local Guardian financial advisor.
Frequently asked questions about executive life insurance
An executive life insurance policy is a blanket term for several types of life insurance policies designed specifically to protect high-earning company executives or to protect the company from the financial risk of losing them. All of this can be owned either by the executives themselves as part of their benefit plans or by the employer.
Executive bonus plans are often tied to performance or meeting certain company objectives. A common arrangement using life insurance is to use a Section 162 executive bonus plan. In this arrangement, the company provides a bonus to the executive to cover the premium payments of a permanent life insurance policy that is owned by the executive. The policy provides insurance protection but also builds cash value that serves as a type of deferred compensation that can later be accessed for retirement income or other needs.
