Protect the business behind your green card sponsorship

Key person insurance is a company-owned life insurance policy on an employee the business depends on. The company pays the premiums and receives the death benefit if that employee dies. When a company sponsors an employee’s green card, this coverage can help plan for that employee’s role. It does not change or satisfy any immigration requirement.

What key person insurance is and who it fits

Key person insurance helps a business respond financially if a key employee dies. The Insurance Information Institute describes it as a way to compensate a business for losses caused by a key employee’s death or disability.

Green card sponsorship often means the company is investing in one person’s role. That role may tie to revenue, client relationships, or know-how that is hard to replace. Companies in that position often review key person coverage to plan for a loss.

Keep the two questions separate. Petition questions belong with your immigration counsel. Insurance questions belong with a licensed agent who can explain the coverage.

Insurance is offered by the licensed agent, separately from the accounting practice.

What the policy covers and who may not qualify

The death benefit is paid to the company, and the company decides how to use it. The company may use the money to recruit and train a replacement, cover lost profits during the transition, or pay down business debt. The policy does not pay the employee’s family.

The policy can be term or permanent. The NAIC Life Insurance Buyer’s Guide explains the differences between term and permanent coverage and what to ask before you buy.

Underwriting comes next. The insurer asks health questions, and issue may depend on insurability. The insurer can decline a policy based on those answers.

Some companies cannot get a policy at all. Under Fla. Stat. § 627.404, a business entity has an insurable interest in the owners, directors, officers, partners and managers of the business or of any affiliate or subsidiary of it, and in key employees or key persons of the business or of an affiliate or subsidiary, if they consent in writing before the insurance is purchased.

Who owns the policy, who is insured, and who receives the benefit

In most key person cases, the company owns the policy, the employee is the insured, and the company is the beneficiary. Keep these three roles straight. Each one controls a different part of the deal.

Here is a simple example. A Florida company sponsors an engineer’s green card. The company applies for a policy on the engineer’s life. It names itself as owner and beneficiary and pays the premiums from company funds. If the engineer dies, the death benefit goes to the company, not to the engineer’s family.

Written consent is the key step. Florida law requires the employee’s written consent before the policy is bought. Federal rules for employer-owned contracts also look for written consent and written notice that the company will be a beneficiary. See 26 U.S.C. § 101.

Federal law also sets annual reporting and recordkeeping rules for certain employer-owned policies. See 26 U.S.C. § 6039I. Have corporate counsel and your tax adviser review the owner and beneficiary choices before you apply.

What drives the cost and how the tax treatment works

Cost depends on the insured’s age and health, the coverage amount, the policy type, and the insurer’s underwriting. Two requests for the same employee can produce different premiums if the coverage amount or policy type differs.

Premiums are generally not deductible. Under 26 U.S.C. § 264, no deduction is generally allowed for premiums on a life policy when the company is directly or indirectly a beneficiary.

The death benefit is generally not income. 26 U.S.C. § 101(a) generally excludes from gross income amounts received under a life insurance contract by reason of the insured’s death. For an employer-owned life insurance contract, however, § 101(j) limits the company’s exclusion to the sum of the premiums and other amounts it paid for the contract, unless the notice-and-consent requirements are met and one of the statute’s exceptions applies. The transfer-for-value rule can change that result. Interest the insurer pays on proceeds it holds is taxable.

From the CPA side, the bookkeeping should match who owns the policy and who pays the premium. A mismatch can cause confusion when the company closes its books or reviews cash flow. We review tax results against the company’s facts and the policy’s terms before any recommendation.

How the process works, step by step

The process starts with a coverage review. It then moves through written options, the application, and policy delivery. Each step gives you a clear decision point.

1. Coverage review. We meet to talk about the employee’s role, how much the business depends on it, and the company’s goals. Fees are explained in a written engagement letter before any work begins.
2. Information gathering. We ask for financial statements, the employee’s role and pay, any existing coverage, and the immigration timeline as your counsel describes it.
3. Written options. We compare policy options in writing. The insurer, form number, and limitations and exclusions appear next to each option.
4. Application and consent. The employee signs written consent before the policy is bought. The insurer then reviews health answers and decides how to issue the policy.
5. Delivery and review. You receive the policy and a review period after delivery, as Florida’s consumer life insurance guide explains. We then set up premium payments and check coverage each year against changes in the employee’s role.

Why work with NR CPAs & Business Advisors

NR CPAs & Business Advisors is a Miami CPA firm. It helps families, professionals, and business owners across the United States choose and buy life insurance. That work includes key person and buy-sell coverage.

We offer a combined view. The licensed agent handles the coverage analysis. The CPA side looks at tax, cash flow, and how premiums and benefits affect the company’s books.

Nischay Rawal is the responsible agent for this page and is a licensed insurance agent. Florida law requires agents to clearly indicate to prospective insureds that they act as insurance agents, as Fla. Stat. § 626.9531 provides.

The licensed insurance agent who sells these policies is paid a commission on policies sold, and we explain that commission to you in writing before any engagement. We offer no rebates or inducements to buy a policy.

Frequently asked questions

Talk with us about your company’s situation

If your company is sponsoring an employee’s green card, you may be asking what the business would do if that person could no longer work there. You don’t have to sort that out alone. Contact NR CPAs & Business Advisors to set up a coverage review and plan to protect the business and the people who rely on that role.