Creditor life insurance is sort of like mortgage life insurance (the kind offered by the bank when signing a mortgage). It is a form of insurance that will be bought to cover a loan for personal use or for a business. It protects the lender and people who are dependents of the insured person from defaulting on the loan in the event of death. We can always buy life insurance to cover debts, but “creditor” insurance IS required by the lender and the lender is the mandatory irrevocable beneficiary. If the coverage is NOT required by the lender, then you are free to name any beneficiary you like, but this isn’t “creditor” insurance by definition.
For business, when insurance is required by a lender, then the cost of insurance may be tax deductible. Make sure you have your insurance needs reviewed by a licensed professional and have your tax questions addressed by your accountant or other tax professional.
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