Key Person Insurance for a Visa Holder Owner in Florida

If you hold an H-1B, L-1 or E-2 visa and help run a U.S. company, your business may depend on your role. Key person insurance for a visa holder owner is a life insurance policy the company buys on that person, so the business can cover money it may lose if that person dies.

Coverage works the same way it does for other owners, but the file needs more care. The company has an insurable interest in its owners, directors, officers, partners, managers and key employees if they consent in writing before the insurance is bought.

What Key Person Insurance Is for a Visa Holder Owner

Key person insurance is a company-owned life insurance policy that pays the business when a key person dies. A key person is an individual whose position or compensation is described in s. 101(j)(2)(A)(ii) of the Internal Revenue Code of 1986, and may be an owner, officer or employee.

The Insurance Information Institute explains that key person life or disability insurance compensates a business for financial losses caused by a key employee’s death or disability. The policy protects the company’s losses.

For an owner on an H-1B, L-1 or E-2 visa, the role may be central. The owner may run client relationships, set pricing, approve hires or manage bank and vendor relationships. If that role is lost, the company may need money to replace the owner, repay debt or keep customers.

Work status depends on the visa category and its conditions. That is one reason a business may want a continuity plan in place early. Nationality is not what decides coverage. The real questions are the company’s need, the insurable interest and the insurer’s underwriting.

What the Coverage Includes

The company usually owns the policy, pays the premiums and is the beneficiary, as the policy terms set out.

• Term life insurance covers a set period. Whole life insurance covers the insured’s lifetime and may include a cash value feature. FINRA explains these differences.
• Guaranteed and non-guaranteed values are shown separately. Any guaranteed cash value is listed apart from values that are not guaranteed.
• Dividends, where a policy pays them, are not guaranteed.
• Death benefit amount should match the company’s real exposure, such as lost revenue, debt or the cost of hiring a replacement.
• Exclusions and limits are written in the policy. Read them before you buy.
• Renewability, cancellability and age-based changes in premium or face amount are part of the policy description. Confirm each item in writing.
• Grace period: Florida law requires a grace period of not less than 30 days for premiums after the first (Fla. Stat. § 627.453).
• Contest limit: Florida policies must be incontestable once they have been in force during the insured’s lifetime for 2 years from issue, except for nonpayment of premiums and certain listed items (Fla. Stat. § 627.455). Policy exclusions can still apply (Fla. Stat. § 627.463).

Insurable Interest, Consent and Underwriting

The company needs an insurable interest in the owner, and the owner must consent in writing before the policy is made.

Florida law lets a business entity hold insurance on owners, directors, officers, managers and key persons. The business must get written consent from them before it buys the insurance (Fla. Stat. § 627.404).

The same law bars the business from taking adverse action against a key person who refuses consent. Consent must be given in writing on or before the contract is entered into. Fla. Stat. § 627.404 reads: “(5) A contract of insurance upon a person, other than a policy of prepaid funeral contract; group life insurance; or group or blanket accident, health, or disability insurance, may not be carried out unless, on or before the time of entering into such contract, the person insured, having legal capacity to contract, applies for or consents in writing to the contract and its terms, except that any person having an insurable interest in the life of a minor younger than 15 years of age or any person upon whom a minor younger than 15 years of age is dependent for support and maintenance may obtain a policy of insurance on the minor.”

Underwriting is the insurer’s review of the application. Health questions are required, and issue may depend on insurability. The insurer can rely on what the applicant states about insurable interest, so the facts you give must be accurate (Fla. Stat. § 627.404).

The file may include business records that show the owner’s role and the company’s ownership.

How the Coverage Review Works

A coverage review is the first meeting with our team. It looks at your business’s exposure, the owner’s insurability questions and the policy types that fit.

1. Contact us. Describe the company, the owner’s role, the visa category and any co-owners.
2. Coverage review with a licensed agent. Nischay Rawal, a licensed insurance agent, reviews the business’s exposure and the policy types that fit. Florida law requires agents, when soliciting or selling insurance, to clearly tell prospective insureds that they are acting as insurance agents with regard to insurance products and identified insurers (Fla. Stat. § 626.9531).
3. CPA review of tax and cash flow. Our CPA side looks at how premiums affect the company’s cash flow. Under 26 U.S.C. § 101(a), gross income does not include amounts paid by reason of the insured’s death, but for an employer-owned life insurance contract, the exclusion may not exceed the premiums and other amounts the policyholder paid for the contract (26 U.S.C. § 101(j)). The IRS explains when proceeds may be taxable or nontaxable. Federal rules also require every applicable policyholder owning employer-owned life insurance contracts issued after the date of the enactment of this section to file a yearly return showing the number of employees, the number insured, the total insurance in force, the policyholder’s identifying details and that it has a valid consent for each insured employee (or, if not all consents were obtained, the number of insured employees without consent) (26 U.S.C. § 6039I).
4. Application and underwriting. The insurer reviews the application. If it issues the policy, the policy is delivered and premiums are paid under its terms.

Insurance is offered by the licensed agent, separately from the accounting practice. If the firm accepts a commission on a policy, it must disclose that to you in writing (Fla. Stat. § 473.3205). Any fees for the firm’s work are set out in writing before work begins.

Why NR CPAs & Business Advisors

NR CPAs & Business Advisors is a Miami CPA firm that helps families, professionals and business owners choose and buy life insurance.

• Coverage types: term life, whole life, key person, buy-sell agreement, estate planning life insurance and NRI life insurance.
• Two views in one place: a CPA firm’s view of tax and cash flow sits alongside a licensed insurance agent’s coverage analysis. Each part has its own role.
• Clients: the firm serves clients across the United States, including Indian-American households and business owners.
• Responsible agent: Nischay Rawal is a licensed insurance agent and the responsible agent on this page.
• Location: the firm is based in Miami, Florida.

Common Questions About Visa Holder Owner Coverage

Most questions come back to three points: insurable interest, the owner’s written consent and the underwriting result.

Talk With Our Team About Your Business’s Continuity

If your role keeps your company running, a plan for that risk is worth raising early.

Think about what would happen next week if you could not work. Who would handle your clients, your bank and your payroll? A coverage review can help you see the exposure and the policy types that fit.

Call us today to set up your coverage review with our team.