Here's my attempt at running the numbers: Scenario one: Company takes out an insurance policy for $1,000,000 on an employee. The expected remaining life of the

Here's my attempt at running the numbers: Scenario one: Company takes out an insurance policy for $1,000,000 on an employee. The expected remaining life of the employee is 20 years. The expected return on investment is 5%. The insurance company prices the contract so they make 10% of the returns. The company pays $32,000 per year for 20 years, then gets the $1,000,000 payout. In the insurance policy scenario, the company gets $1,000,000, with no taxes owed, a gain of $360,000. Scenario two: The company invests this $640,000 ($32,000/year * 20 years) on its own on the same schedule and with the same expected return on investment. They earn approx. $1,111,000 and owe capital gains tax on the $471,000 gain, which at a rate of 15% is $71,000, for a net gain of $400,000. Scenario two: investing the money themselves and paying cap gains, makes more sense than scenario one: buying insurance. Unless the insurance company is taking less than a 7% vig.