Owner Life Insurance
insurance has long been a valuable tool that business owners use to reduce
risk and to provide the basic financial foundation for continued success.
Most business owners recognize the importance of life insurance and use it
to solve many of the problems associated with maintaining and growing a successful
company. Some common uses of business
owner life insurance include: key man
insurance, security for loans, buy-sell agreement funding, asset accumulation
and estate planning.
Buy-Sell Agreement Funding and Life
A buy-sell agreement
is a legally binding contract which states that at an owner or partner’s death, disability, retirement or otherwise separation
from the company, the individual’s interest in the company must be
sold back to the business or to the remaining owners at agreed upon terms.
These agreements are crucial for small and closely held companies, as in
many cases, the death or disability of a business owner creates a significant
financial burden on the business as well as the remaining partners. To limit
this potential risk, most buy-sell agreements are funded with life insurance
and or disability insurance policies. Depending on the type of buy-sell agreement,
see “Types of buy-sell agreements”,
the business itself or the individual partner(s) acquires a policy on each
owner/partner so that at death or disability the funds needed to “buy
out” the individual’s ownership interest are readily available.
For more information see, “What is
a Buy-Sell Agreement?”
Man Insurance for Business Owners
small businesses the key man or key employee in the business is the business
owner. In these cases, key man life insurance can be purchased on the life
of the business owner to protect the company in the event that he/she unexpectedly
passes away. With key man insurance, the business owns the insurance policy
and pays the premiums and is also the beneficiary. If the business owner
dies, the business receives the policy proceeds and can use the funds to
hire a capable replacement, pay off debts or simply use the funds to buy
time until the businesses assets can be liquidated and the business can
be closed. In any event, key man life insurance on the business owner can
provide much needed stability if there is a sudden and unforeseen death.
Home / Business
Owner Life Insurance / Buy-Sell
Agreement Advantages / Buy
Sell Insurance Quote