What life insurance arrangement allows for a key person to purchase insurance with the employer contributing to the premium?

The arrangement that permits a key person to acquire life insurance with the employer funding the premium is known as Split Dollar Life Insurance. This insurance is a method where the employer and the employee (or key person) share the costs and benefits of the policy.

In a typical split dollar arrangement, the employer pays a part or all of the premium, and in return, they receive certain benefits related to the policy. When the policy matures or upon the death of the insured, the death benefit will typically be split between the employer and the employee's designated beneficiaries. This structure not only provides insurance coverage for the key individual but also aligns the interests of both the employer and the employee in terms of financial security.

This option effectively leverages the employer's investment while providing assurance to the employees and motivating them, particularly vital for key personnel whose contribution significantly impacts the company’s success.