Business Life Insurance: Your Key to Protecting Your Business and Your Family

You have sacrificed and worked long hours to build your successful business. It wouldn’t make sense to fail to plan for what will happen to your business upon your death. Planning with business life insurance helps protect your family, your partners and the business you have built if something happens to you, a fellow owner or even a key employee.

Business life insurance is insurance on the life of a sole proprietor of a business, or on the life of a member of a partnership or an officer or stockholder in a corporation. Proceeds from business life insurance are used to finance the purchase of the business by surviving owners (or outside parties for a corporation) upon the insured’s death.

Business life insurance can also be insurance on the life of a key employee to protect a business from losses if that employee dies.

Business Owner Life Insurance

Business owner life insurance provides protection for your family in the event of your death.

The proceeds from business owner life insurance will help your family with the costs, expenses or liabilities related to your business and how they will need to be handled when you are gone.

Buy-Sell Agreements

Buy-sell agreements ensure that if a co-owner of a business dies, the remaining business owners will have the funds to buy the portion held by the deceased co-owner at a previously agreed upon price. The buyout money goes directly to the deceased owner’s family, or whoever inherited the business shares.

Buy-sell agreements are a particularly valuable planning mechanism, as they remove uncertainty by protecting the interests of all parties. A buy-sell agreement will identify future buyers, predetermine the sale price of the business through an agreed upon valuation method, and provide the ready cash to ensure that the business is sold at a fair price.

Key Employee Insurance

Key employee insurance protects your business from the consequences of the death of a key employee. If your company’s success relies heavily upon the contribution of specific individuals, you might want to consider key employee insurance. Proceeds from key employee insurance can be used to offset any loss of sales, knowledge or expertise that your business would experience if a key person dies.

A key employee is typically defined as an employee who has a major ownership and/or decision-making role in the business.

Group Life Insurance

Group life insurance is different from business life insurance. Group life insurance is offered by an employer or large-scale entity (e.g., an association or labor organization) to its workers or members. Group life insurance is typically offered as a piece of a larger employer or membership benefit package.

Do you own a business? Do you have business life insurance? Do you and your partners have a buy-sell agreement in place? Have you considered the impact of the loss of a key employee?

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