For key-person life insurance that a business owns and is the beneficiary of, the federal tax treatment is generally that the:

Explanation

With key-person insurance, the business cannot deduct the premiums because it is the beneficiary of a policy on a valuable employee, but in exchange the death benefit it receives is generally income-tax-free (subject to employer-owned life insurance notice and consent rules). The premiums are not deductible, so options describing deductible premiums are wrong, and there is no special tax credit. This mirrors the general principle that nondeductible premiums buy a tax-free benefit.