Insurance You can generally deduct premiums you pay for the following kindsof insurance related to your business. Fire, theft, flood, or similar insurance. Credit insurance on losses from unpaid debts. Group hospitalization and medical insurance for employees,including long-term care insurance. Liability insurance. Malpractice insurance that covers your professional personalliability for negligence resulting in injury or damage to patients orclients. Workers' compensation insurance set by state law that coversany claims for bodily injuries or job-related diseases suffered byemployees in your business, regardless of fault. Contributions to a state unemployment insurance fund. Youcan deduct these contributions as taxes if they are considered taxesunder state law. Overhead insurance. This insurance pays you for businessoverhead expenses you have during long periods of disability caused byyour injury or sickness. Car and other vehicle insurance for vehicles used in yourbusiness if you do not use the standard mileage rate to figure yourcar expenses. Life insurance covering your employees if you are notdirectly or indirectly the beneficiary under the contract. Use and occupancy and business interruption insurance. Thisinsurance pays you for lost profits if your business is shut down dueto a fire or other cause. Report the proceeds as ordinaryincome. You cannot deduct the following kinds of insurance premiums. Self-insurance reserve funds. You cannot deduct amountscredited to a reserve you set up for self-insurance. This applies evenif you cannot get business insurance coverage for certain businessrisks. However, your actual losses may be deductible. See Publication 547,Casualties, Disasters, and Thefts (Business andNonbusiness). Loss of earnings. You cannot deduct premiums for a policythat pays for your lost earnings due to sickness or disability.However, see item (8) in the previous list. Insurance to secure a loan. If you take out a policy on yourlife or on the life of another person with a financial interest inyour business to get or protect a business loan, you cannot deduct thepremiums as a business expense. Nor can you deduct the premiums asinterest on business loans or as an expense of financing loans. Health insurance deduction for the self-employed.You can deduct up to 60% of the amount you paid during 1999 formedical insurance and qualified long-term care insurance for yourselfand your family. How to figure the deduction.Generally, you can use the worksheet in the Form 1040 instructionsto figure your deduction. However, if either of the following applies,you must use the worksheet in chapter 10 of Publication 535,Business Expenses. You have more than one source of income subject toself-employment tax. You file Form 2555 or Form 2555-EZ (relating toforeign earned income). Cash or accrual method prepayments.You cannot deduct the entire premium for an insurance policy thatcovers more than one tax year in the year you make the payment orincur a liability for the payment. For the year in which you make thepayment or incur the liability, you can deduct only the part of thepremium that applies to that year. For each later tax year, you candeduct the part that applies to that tax year. More information.For more information about deducting insurance, see chapter 10 inPublication 535.