Life Insurance for Business

Nearly every business has employees who are critical to the success and profitability of the business.  The loss of a key employee’s skills, talents and experience can be difficult or even devastating for a business, especially a small business. 

To help protect against the economic loss caused by the death of a key employee, a business can purchase life insurance on the key employee's life.  Proceeds can be used in any way the business needs, such as

• funding the hiring new or training existing staff 
• covering the loss of revenue due to the key person's talents 

Key employee life insurance is not a specific type of policy, but rather an effective use of life insurance within the business. 

When a business owner dies, the disposition of the deceased owner's business interest can create financial problems for both the heirs and the business itself. 

Thankfully buy/sell agreements typically address questions such as 

• Who will purchase the business interest?
• What is a fair price?
• When will the sale occur?

But what is not typically addressed is where the funds for the purchase will come from. By default the funds are from the general assets of the business or out of the surviving owner's pockets.

This dilemma is easily resolved when the owners have established buy-sell life insurance policies in place. 

Many small and medium sized business owners seek out one or more lines of credit or a small business loans to expand or create business opportunities.  When closing on the funding, most lenders require a life insurance policy as "collateral".

You should know, that the life insurance policy used does not have to be purchased from a "captive" provider through your lender.  In fact, most often a term policy purchased at "arms length" is not only less expensive but can be tailored to meet the loan payment schedule. 

We have helped many business owners secure policies and properly structure the collateral assignment to satisfy lenders and save the business premiums.