Key Person Life Insurance on an H-1B Employee in Florida

Key person life insurance on an H-1B employee is a life policy a business owns on that worker. The business pays the premiums and receives the death benefit if the employee dies. A business can buy this coverage on a key employee or key person when, under Fla. Stat. § 627.404, consent is obtained in writing from the key employees or persons before the insurance is purchased.

What Key Person Life Insurance on an H-1B or L-1 Employee Is

Key person life insurance is a life insurance policy a business buys on a worker whose loss would hurt the company. The Insurance Information Institute says it compensates a business for financial losses caused by a key employee’s death or disability.

The business is the policy owner and beneficiary. The death benefit goes to the company, not to the employee’s family. The money can help cover lost revenue, recruiting costs and the time it takes to replace the person.

Florida law ties the term “key employee” to a person’s position or compensation, as described in federal tax law. Florida law sets the rules on who may buy insurance on another person’s life, including the insurable-interest requirement.

This page is for owners and finance or HR leaders at companies that employ or sponsor H-1B or L-1 workers. Key person life insurance is still a life policy. It is not a substitute for employer health coverage.

Insurable Interest: Why the Business Is the Starting Point

Florida law sets the rules for that interest and for consent.

Fla. Stat. § 627.404 says a business entity has an insurable interest in key employees when they consent in writing before the insurance is bought. The business may not retaliate against an employee who refuses consent.

The statute also says a signed application, from a person with legal capacity, counts as written consent. It adds that the insurable interest does not have to continue after coverage starts.

Keep records of these facts.

The statute looks at the business, the employee’s position and the consent.

Who Owns, Pays For and Receives the Policy

The company is usually the owner, premium payer and beneficiary. The employee is the insured person. This setup keeps the policy tied to the business, not to the employee’s personal finances.

Federal tax law sets conditions for employer-owned policies. Under Florida law, the person insured must consent in writing to the contract and its terms on or before the time the contract is entered into, subject to exceptions such as group life insurance. Under Fla. Stat. § 627.404, the employee’s written consent to the contract and its terms is required.

Owners should decide the beneficiary before the policy starts. Naming a minor directly can complicate payment. A trust or other structure can control how the proceeds are held.

Ownership changes need care. Under 26 U.S.C. § 2042, proceeds payable to other beneficiaries can count in an estate when the insured held ownership rights at death. Review every ownership or beneficiary change before making it.

How Visa Status and Time in the U.S. Can Affect Coverage

Visa status and time in the United States can change which carriers and policies are available. Carriers ask about residence and visa status during underwriting. Two people of the same age and health may see different options.

A foreign-national employee may need a different carrier or policy form than a U.S. citizen with similar health. Some owners ask whether a U.S. policy or one issued from abroad fits better. That choice belongs in the coverage review.

No one can promise approval in advance. Each carrier decides each application under its own underwriting rules.

What the Policy Covers and the Tax and Cash-Flow Questions for Owners

A key person policy pays a death benefit to the business under a written policy form. The policy should show the insured, the owner, the beneficiary, the premium schedule and the terms for renewal and cancellation. Read each item before you sign.

Term life covers a set period. Whole life is designed to last for the insured’s lifetime and can build cash value. The NAIC Life Insurance Buyer’s Guide covers term versus permanent coverage and questions to ask before buying.

Guaranteed and non-guaranteed values should be shown separately. Any illustration is limited by its assumptions, so read those limits too.

Tax treatment matters for owners. Under 26 U.S.C. § 6039I, an applicable policyholder owning one or more employer-owned life insurance contracts issued after the enactment of this section must file a return for each year it owns them.

Heavy funding of a whole life policy can make it a modified endowment contract. Under 26 U.S.C. § 7702A, a contract fails the 7-pay test when premiums paid in the first seven years exceed a set limit. That changes how withdrawals and loans are taxed.

How the Coverage Review Works, Step by Step

A coverage review starts with the facts about the employee and the company. It then moves to carrier options, underwriting and the tax review.

1. Share the facts. Give the employee’s role, the company’s ownership and the reason for the coverage.
2. Review visa status and residence. Nischay Rawal, a licensed insurance agent, reviews residence history, visa status and insurability questions. He identifies carrier options that fit those facts.
3. Complete the health questions. Fully underwritten policies require health questions. Issue may depend on insurability and the carrier’s findings.
4. Review the policy. Florida’s life insurance consumer guide describes a review period after a policy is delivered. Use that period to check every term.
5. Review tax and cash flow. Our team reviews tax and cash-flow treatment separately from the insurance placement. Any ownership or beneficiary change is documented.

Why NR CPAs & Business Advisors Handles This Question

NR CPAs & Business Advisors is a Miami CPA firm. It serves families, professionals and business owners across the United States, including Indian-American households and business owners.

Insurance is offered by the licensed agent, separately from the accounting practice. Nischay Rawal is a licensed insurance agent in Florida.

Our view is that the insurance decision should be reviewed alongside the company’s tax and cash-flow position. We do not offer rebates or other inducements to buy coverage.

Any commission is disclosed in writing before we work together. The engagement letter sets out the full compensation details. Fla. Stat. § 473.3205 requires that written disclosure for CPA firms that accept commissions.

Questions Business Owners Ask Before Deciding

Most questions come down to three points: the business’s interest, the employee’s consent and who owns the policy.

If a key engineer’s visa or relocation plans have you worried about the business, you don’t have to sort out the insurance alone. Contact NR CPAs & Business Advisors to request a coverage review.