Life Insurance – Business Needs

Here are some of the uses of a properly structured life insurance program for your business:

Key Employee

What will be the impact to the business if a key employee dies? How will operations and revenue be impacted based on their service to the business, relationships with customers and vendors, etc.? How long will the negative impact last? The life insurance death benefit can provide cash to help the company through the transition period while trying to replace the key employee.

Buy-Sell Agreement

Who will inherit ownership in the business when a current owner(s) dies? Is the successor owner(s) an appropriate partner/owner for the business, or do they even want to be involved in the business? If not, an agreement to purchase their ownership should be considered. Life insurance can be used to fund this agreement and minimize the financial impact to the business of changing owners. The amount of insurance to meet this need depends on the value of the business; the potential growth of the business should be considered in this calculation. The structure of this type of agreement and the life insurance policy can be very complex and should be handled by a knowledgeable advisor.

Employee/Executive Benefit

A properly structured life insurance policy can provide incentive benefits for employees or executives. The policy can be used to provide a bonus or deferred compensation to the executive and provide income tax benefits to the business owner. A policy for this use should be structured by a life insurance professional.