The code162 bonus plan also known as the Executive Bonus Plan is a financial strategy where a business takes out a life insurance policy on a vital member of the company, such as a founder, owner, or essential employee. In this case, if the key person passes away, the business receives the insurance payout to help cover the loss of that critical individual.

Here’s how it works:

Funding: The business pays the premiums and is also the beneficiary of the policy. The premiums can be paid monthly, quarterly or annually.

Benefits: The policy comes with a death benefit/face amount. There’s also the cash value of the policy that grows tax deferred. The life insurance premiums paid can be claimed as a general business expense.

Flexibility: The plan can be customized to meet the specific needs of the business.