There is a balance sheet which lists life insurance as other current assets. (2024)

FAQs

Where does life insurance go on a balance sheet? ›

The cash surrender value of a life insurance policy provides a future economic benefit as it is the amount that can be realized by the company if the policy is surrendered. Therefore, it is the cash surrender value of the life insurance contract that is recorded as an asset on the corporate balance sheet.

Assets whose value is recorded in the Current Assets account are considered current assets. Current assets include cash, cash equivalents, accounts receivable, stock inventory, marketable securities, pre-paid liabilities, and other liquid assets.

Life Insurance as a Liability

Any type of life insurance that doesn't earn cash value is considered a liability. The most common type of non-cash value life insurance is term life insurance. With a term policy, you owe regular payments and you're not guaranteed anything in return.

When the insurance coverage comes into effect, it is moved from an asset and charged to the expense side of the company's balance sheet. Insurance coverage, though, is often consumed over several periods. In this case, the company's balance sheet may show corresponding charges recorded as expenses.

The death benefit of a life insurance policy is not considered an asset, but some policies have a cash value, which is considered an asset. Only permanent life insurance policies, like whole life, can grow cash value.

“Other assets,” as used in this section, includes all balance sheet asset accounts not covered specifically in other areas of the supervisory activity. Often, such accounts may be quite insignificant in the overall financial condition of the bank.

Key Takeaways

Current assets are a company's short-term assets; those that can be liquidated quickly and used for a company's immediate needs. Noncurrent assets are long-term and have a useful life of more than a year. Examples of current assets include cash, marketable securities, inventory, and accounts receivable.

Other current assets are a category on a company's balance sheet that includes short-term assets that do not fit into more specific categories like cash, accounts receivable, or inventory. These assets are expected to be converted into cash or used up within a relatively short time frame, typically within a year.

Insurance policies are considered as assets within a company's balance sheet. Depending on the type of insurance, it may fall under different categories. For example, if a company has insured its tangible assets like buildings or vehicles, the insurance would be classified as a non-current asset.

Life insurance premium is classified as a personal account, since the insurance premium paid represents the amount paid for an individual.

What is considered life insurance? ›

Life Insurance can be defined as a contract between an insurance policy holder and an insurance company, where the insurer promises to pay a sum of money in exchange for a premium, upon the death of an insured person or after a set period.

On the death of the life insured, the company will receive the proceeds of the life insurance policy. The life insurance asset on the balance sheet will be eliminated. The excess of the life insurance proceeds received over the amount recorded as an asset is reported as income on the income statement.

The amount of the insurance premiums that remain prepaid at the end of each accounting period are reported in the current asset account, Prepaid Insurance. The balance in this account will be combined with the balances in other prepaid expense accounts and will be listed on the balance sheet as prepaid expenses.

Life insurance is most typically allocated into the fixed-income category for its underlying cash value, which is in turn invested in high-grade bonds to support whole life policies. At the other extreme, life insurance can earn Index Credits if policy reserves are deployed, for example, into an S&P500® Index account.

Typically, life insurance is an investment in you or your family's future, but it also can have features that can help you set aside money now that you can access for future needs.