In running a business, you may need to take some types of insurance that makes you wonder if their premiums can be claimed as a business deduction. In general, premiums for insurance that is considered ordinary and necessary in running a business are deductible.  

General Business Insurance Premiums 

• Commercial property insurance that covers fire, theft, flood, or other natural disasters. 

• Liability insurance that covers legal liabilities for claims or damage that comes up during normal operation of a business. 

• Malpractice insurance that protects professionals from liability or lawsuits in case of errors or negligence. 

• Auto insurance for vehicles used for your business. 

• Credit insurance that covers losses from bad debts. 

• Overhead insurance that pays for business overhead expenses you have, such as rent and utilities, during long periods of disability caused by your injury or sickness. 

• Business interruption insurance that pays for lost income if your business needs to stop operation due to a fire or other covered event. 

• Group hospitalization and medical insurance for employees, including long-term care insurance. 

• Workers’ compensation insurance set by state law that covers any claims for bodily injuries or job-related diseases suffered by employees in your business, regardless of fault. 

Life Insurance Premiums 

Generally, life insurance is not deductible since it is considered a personal expense. However, for employers, life insurance premiums paid for employees can be a business deduction if you or your business is not the beneficiary. 

Health Insurance Deduction for the Self-Employed 

One of the many perks of being self-employed is that they may be able to deduct 100% of health insurance premium as a business deduction. Normally, health insurance premiums can only be claimed as an itemized deduction with a required Adjusted Gross Income (AGI) ratio. However, self-employed individuals may be able to deduct the amount paid for medical and dental insurance and qualified long-term care insurance for them and their family as a business deduction. Read our dedicated blog for further details on how to claim health insurance deduction for the self-employed. 

Non-Deductible Insurance Premiums 

• Self-Insurance reserve funds that are set aside for self-insurance needs. 

• Disability insurance that covers lost income due to sickness or disability. 

• Certain life insurance premiums and annuities. 

• Loan protection insurance that secures or protects a business loan. 

Want to learn more? 

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