Do Insurance Premiums Qualify as Payroll Cost for Relief Loans? by Kirk Faulkner on Agency Revolution

The Paycheck Protection Program provides guidelines about what costs will qualify for loan forgiveness.

The 2 trillion dollar CARES act provides relief programs to workers and businesses alike. The program that seeks to provide relief to small and medium businesses (SMBs) is called the Paycheck Protection Program (PPP).The PPP provides loans and incentives to help SMBs maintain their payroll spend.

On April 16th, 2020, the US Treasury reported it had distributed 1,661,367 loans worth $342,277,999,103. Every dollar of those loans can be forgiven if businesses follow certain guidelines.

One of those guidelines states that ¾ of the loan must be spent on “payroll costs”. Insurance agents will be happy to know that payroll costs include paying insurance premiums. 

Understanding the PPP is doubly important for you as an insurance agent. You need to understand how it applies to both your business as well as your customers.  

Here are four important things you need to understand about the Paycheck Protection Program:

  1. Some SMBs don’t qualify
  2. Loans can be fully forgiven
  3. Employers must maintain headcount
  4. It may not be the best decision for all businesses

Some SMBs Don’t Qualify

The rush to submit your PPP application may be for naught if you own an ineligible business. The Small Business Administration (SBA) prohibits loan guarantees to “businesses primarily engaged in lending, investments, or to an otherwise eligible business engaged in financing or factoring.”

Life insurance agencies are on the list of companies that are ineligible for relief loans unless they are independent agencies with fewer than 500 employees.

If there’s any confusion as to what that includes, the SBA lists seven specific ineligible business types under this definition in the statutory code. They include:

  • Life Insurance Agencies with fewer than 500 employees
  • Banks
  • Finance Companies
  • Factoring Companies
  • Investment Companies
  • Bail Bond Companies
  • Other businesses whose stock in trade is money

Loans Can Be Fully Forgiven

The primary benefit  PPP loans is that they are fully forgivable provided the money is spent on approved expenses. 

Approved expenses include:

  • Insurance Premiums
  • Payroll Costs
  • Interest on Mortgages
  • Rent
  • Utilities

The primary purpose of the loan is to cover payroll costs, and these  must account for a full 75 percent of the loan’s use. This requirement aims to ensure relief funds flow through companies and reach those employees affected by the shutdown.

Employers Must Maintain Headcount

In order to remain qualified for the loan forgiveness program, an SMB must not reduce its headcount. If it does, the amount of the loan available for forgiveness decreases commensurately with the headcount/salary decrease.

In order to count towards headcount, employees must be kept on the payroll for eight weeks. The forgiveness period could be reduced from eight weeks to two or fewer for businesses forced to close. 

There are different time periods that employers can use to calculate what their average headcount is, but most will define it by their employee headcount from January 1 through February 29 of 2020.

Not the Best Decision for All Businesses

Some SMBs will find that decreasing headcount is the only way to stay afloat. They will need to consider what percentage of their employees and salaries need to be cut to deal with economic realities.

SMBs will have to ask themselves questions like:

  • Do we have enough business to cover payroll?
  • Which positions are most important to lead to economic recovery?
  • Are there ways to rearrange salaries/hours/personnel in order to reach average headcount levels?

The guidelines of this program will present many SMBs with difficult decisions. Uncertain times make people look to their agents for stability. When there is a significant change in the status quo, it is imperative that insurance agents understand the situation as much as possible. 

Understanding the terms is also important for agents’ personal situations, as many are SMB owners themselves.

The PPP is only available for a limited time. The deadline for rehiring employees and qualifying for loan forgiveness is June 30, 2020. 

Here is the Official Overview of PPP released by the Treasury:


The Paycheck Protection Program provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities.

Fully Forgiven

Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75 percent of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.

Must Keep Employees on the Payroll—or Rehire Quickly

Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

All Small Businesses Eligible

Small businesses with 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors—are eligible. Businesses with more than 500 employees are eligible in certain industries.

When to Apply

Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply.

We encourage you to apply as quickly as you can because there is a funding cap.

How to Apply

You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit

System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating. All loans will have the same terms regardless of the lender or borrower. A list of participating lenders, as well as additional information and full terms, can be found at

The Paycheck Protection Program is implemented by the Small Business Administration with support from the Department of the Treasury. Lenders should also visit or for more information.

Meeting the Payroll Costs 

Perhaps the most important thing for agents to know: Payroll costs include insurance premiums. 

It also includes:

  • Salaries/wages under $100,000
  • Unpaid PTO
  • Severance Payments
  • Group Health Care Benefits
  • Retirement Benefits
  • Taxes Employee Compensation

Finding ways to use the PPP loans that qualify as payroll costs will help SMBs be able to use their relief funds to provide the most economic support.

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