Any permanent or even term coverage can be used to fund a Section 162 Plan although almost always some form of permanent insurance is indicated to pay-up the policy by the time the insured reaches retirement age. Consider a policy on which cash dividends, the surrender of paid-up additional insurance, or there is sufficient cash value that the employee can withdraw or borrow that can be used offset the employee’s tax on the premiums paid by the employer.
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Reproduced with permission. Copyright The National Underwriter Co. Division of ALM