Business Succession Planning Life Insurance

With business owner life insurance, your company can continue if you were to die. Take a moment and think if your company could operate without you.

A life insurance death benefit could provide financial safety for your family, business partner and/or your company. The death benefit could be used for:

• Liquidity in order make sure the business isn’t sold hastily.
• Used to hire an employee or replacement.
• Provide the money needed to buy the part of the business owned by the deceased.

Life insurance for business is important in that it give a period of time for the company to appropriate transitions when an owner dies. The death benefit allows the business to pay salaries and bills. It allows the remaining owners of the company to purchase the deceased partner’s percentage of the business.

Buy Sell Agreements Life Insurance

When you are one of the owners of a business, you’ll want to be sure you’re protected if one of your partners died unexpectedly. A solution to this problem is a buy-sell agreement. This means that there is a contractual obligation on the surviving partners to buy the interest of the owner who died.

A buy sell agreement is important for several reasons:

• It will provide a death benefit to the estate or spouse of the deceased business owner and cover the lost revenue or income from the company.
• It can eliminate the uncertainty or stress when the surviving beneficiary or spouse has control over the deceased partner’s interest when they may not have the ability to manage the business or want to.
• It decreases the likelihood that the company would be sold in order to buy out the deceased owner’s interest.

A business owner usually funds the buy sell agreement by buying a life insurance policy for each owner. The other owners of the business are typically the beneficiaries. It depends on how the agreement is constructed. Sometimes the business itself is made the beneficiary.

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Buy-Sell Agreement Life Insurance

Key Person Life Insurance

Another business continuation strategy is using a key person life insurance policy. Once called “Key Man Life Insurance”, a key person insurance policy is bought by the business on an important employee and payable to the company. If the key person were to die, the life insurance policy can assist in making up for lost earnings and sales. It can also cover the costs of looking for a replacement and training them.

A large business may be able to survive and weather the storm of an employee. However, smaller businesses may depend on certain employees for the company to be successful. Buying a key person life insurance policy can be very helpful by making sure the company survives the loss of a key employee.