{"id":8287,"date":"2026-10-31T02:26:40","date_gmt":"2026-10-31T02:26:40","guid":{"rendered":"https:\/\/nrcpas.com\/life-insurance-guides\/key-person-insurance\/does-company-need-employee-consent-key-person-life-insurance\/"},"modified":"2026-10-31T06:50:54","modified_gmt":"2026-10-31T06:50:54","slug":"does-company-need-employee-consent-key-person-life-insurance","status":"publish","type":"page","link":"https:\/\/nrcpas.com\/life-insurance-guides\/key-person-insurance\/does-company-need-employee-consent-key-person-life-insurance\/","title":{"rendered":"Key Person Insurance: Does a Company Need Employee Consent?"},"content":{"rendered":"\n
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Key Person Insurance<\/a> | Miami and Florida<\/p>

Does Your Company Need Employee Consent for Key Person Insurance?<\/h1>

Key person life insurance can protect a business when a valued owner or employee dies. Before a policy is issued, questions about notice and written consent matter. Insurance is offered by Nischay Rawal, a licensed insurance agent, separately from the accounting practice of NR CPAs & Business Advisors.<\/p>

Call us today to schedule a coverage review<\/a><\/div>
Call us today to schedule a coverage review<\/a><\/div><\/div>\n<\/div><\/div>\n\n\n

By Nischay Rawal \u00b7 Published October 30, 2026<\/p>\n\n

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Under IRC \u00a7 101(j)<\/a>, an employer-owned life insurance contract can qualify for certain exceptions to the cap on the tax exclusion only if the employee receives written notice and gives written consent before the contract is issued. Without them, the death benefit may not get the full income tax exclusion. This page explains the rule in plain words for business owners and for employees who were handed a form.<\/p>\n

Short answer: when is written employee consent required?<\/h2>\n

Written consent is required when a business owns a life insurance policy on an employee and wants the death benefit excluded from income under the employer-owned rule. The rule is a tax rule. Whether a company may buy a policy on a key person’s life depends on the facts of the case and the rules that apply to it.<\/p>\n

Nischay Rawal, a licensed insurance agent, handles the policy side. Tax questions sit with the firm’s accounting practice. Insurance is offered by the licensed agent, separately from the accounting practice.<\/p>\n

The consent question matters because it decides how the death benefit is treated for tax purposes.<\/p>\n\n

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If you were handed a consent form and aren't sure what it means, request a coverage review with our team and we'll walk through it with you. Talk it through with our team — we can walk you through how a situation like yours is usually handled and what your options are.<\/p>

Schedule a coverage review<\/a><\/div>
Schedule a coverage review<\/a><\/div><\/div>\n<\/div>\n\n
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The federal notice-and-consent rule for employer-owned life insurance<\/h2>\n

The rule says the death benefit stays fully excluded from income only when notice and consent requirements are met. Congress added the related reporting rule in 2006 (IRC \u00a7 6039I<\/a>).<\/p>\n

Under IRC \u00a7 101(j)<\/a>, the amount excluded from income cannot exceed the premiums and other amounts the policyholder paid. For an employer-owned life insurance contract where the notice and consent requirements of IRC \u00a7 101(j)(4)<\/a> are met, the cap in \u00a7 101(j)(1)<\/a> does not apply to certain listed amounts, such as amounts received by reason of the death of an insured who, with respect to an applicable policyholder, meets the status tests in \u00a7 101(j)(2)<\/a>(A).<\/p>\n

Two plain-word terms help. An employer-owned policy is one the business owns and pays for. A key employee is someone whose loss would cause the business financial harm. The Insurance Information Institute<\/a> explains that key person coverage compensates a business for financial losses caused by a key employee’s death or disability.<\/p>\n

The rule also has exceptions. Which ones apply depends on the facts.<\/p>\n

What the employee notice and consent should cover<\/h2>\n

The notice and consent should be in writing and dated before the policy is issued.<\/p>\n