Nondeductible Premiums You cannot deduct premiums on the following kinds of insurance. 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. Loss of earnings. You cannot deduct premiums fora policy that pays for your lost earnings due to sickness ordisability. However, see the earlier discussion on overhead insurance,item (8), under Deductible Premiums. Certain life insurance and annuities. Forcontracts issued before June 9, 1997, you cannot deduct thepremiums on a life insurance policy covering yourself, an employee, orany person with a financial interest in your business if you aredirectly or indirectly a beneficiary of the policy. You are includedamong possible beneficiaries of the policy if the policy owner isobligated to repay a loan from you using the proceeds of the policy. Aperson has a financial interest in your business if the person is anowner or part owner of the business or has lent money to the business. For contracts issued after June 8, 1997, yougenerally cannot deduct the premiums on any life insurance policy,endowment contract, or annuity contract if you are directly orindirectly a beneficiary. The disallowance applies without regard towhom the policy covers. Partners. If, as a partner in a partnership, youtake out an insurance policy on your own life and name your partnersas beneficiaries to induce them to retain their investments in thepartnership, you are considered a beneficiary. You cannot deduct theinsurance premiums. Insurance to secure a loan. If you take out apolicy on your life or on the life of another person with a financialinterest in your business to get or protect a business loan, youcannot deduct the premiums as a business expense. Nor can you deductthe premiums as interest on business loans or as an expense offinancing loans. In the event of death, the proceeds of the policy arenot taxed as income even if they are used to liquidate thedebt.