BUSINESS LIFE INSURANCE
- What would happen to your business with the loss of a key person in the organization or if the company was sold to another owner?
- Many business owners and managers don’t think about the potential consequences of these types of changes,
- but you need to have a plan in place in case you find yourself facing a similar situation.
- Would your company suffer because of lost business profits?
There are two services that you should consider in your business planning:
- Business Life Insurance and Buy-Sell Planning.
WHAT IS BUSINESS LIFE INSURANCE?
- Business life insurance is a policy designed to cover key people within the organization.
- The death of a key person can cause a domino effect of problems, including the disruption of management, decrease in team confidence, reduction of earnings, and difficulty replacing that person.
- In order to determine the amount of the business life insurance policy, the insurance company will consider the person’s contribution to earnings, the capitalization of their salary, the costs of replacing the person, and a year of profit to give you a year of time to find a replacement and get things going again.
HOW DOES A BUSINESS INSURANCE POLICY WORK?
- There are specific steps that are followed for this type of key-person life insurance plan.
- First, the business needs to set a value and purchase the insurance on that key person.
- Monthly premiums are paid on the business owner as well as the beneficiary of the policy.
- In the situation where the key person dies, then the life insurance proceeds are paid directly to the business.
- Then, that money is used to cover costs such as time and efforts to replace that person, credit, lost productivity, and lost sales.
BUY-SELL PLANNING BUSINESS INSURANCE
- If you want to protect your family’s financial security as you are preparing for the continuation of your business, then a buy-sell agreement is an essential legal contract that needs to be created.
- An effective buy-sell agreement will include two parts: the legal document which defines the agreement, as well as the details about the funding sources for the business transaction.
- This buy-sell agreement is applicable if an event occurs that results in the business changing hands: owner retirement, disability, or death.
- A plan is put into place in advance, to ensure an orderly transfer of the company if one of these events occurs.
- The plan manages the way the insurance funds will be disbursed, in order to manage tax costs and ensure the benefits are paid in the right way.
- Do you need help protecting your business with insurance and a buy-sell plan? We are always available to answer your questions and help with anything that you need.
- Contact us to learn more about how you can protect your business: 800-316-2089