Business Life Insurance Explained

Applying Life Insurance To Business Needs

A business succeeds through the talent and hard work of one individual or, in most cases, a team. You want to assure yourself that this business continues. The owner must look ahead and take into consideration death, disability and retirement of the participants...those who make it all work.

• Key Employee

  Every business has that one unique individual who makes it all work. This may be one of the owners or, perhaps, an employee. If this key employee should die prematurely it could be quite costly to the business. If there is sufficient life insurance on the life of this person, however, the company will have cash to help adjust and train a replacement.

• Sole Proprietor

  The owner of a sole proprietorship and the business itself are one in the same. The assets and liabilities of the sole proprietorship are applied to both the owner and the business itself. Upon the death of the owner the business dies.

  In order to transfer ownership the business must be dissolved and restarted by the new owner. This process can be quite costly. Life insurance can be used to offset the cost and give the new owner, in most cases a family member, a fair start.

• Business Partnership

  A business partnership is a separate entity unlike a sole proprietorship. A partnership consists of 2 or more people who get together with a common goal in mind. In the event of the death of one of the partners there is an immediate concern about the distribution of the deceased partners shares.

  It is wise to legally put together a binding buy sell agreement beforehand that would create a binding and instant market for these shares. The business would continue without interference and the deceased partners heirs would get a fair price.

• Small Corporations

  S Corporations, C Corporations and Limited Liability Companies are also separate entities. In the event of the death of one of the shareholders the assets of the deceased can be distributed by a buy sell agreement drawn up by an attorney beforehand. The effect will be similar to that of the partnership.

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