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For Business Owners
If your business depends on a few key people, it's worth looking at what happens if one of them dies. Not every business needs this. Let's figure out if yours does.
60-minute business review. State check first.
Key-person coverage
The business owns a policy on someone it depends on. If that person dies, the business gets money to help with the financial hit. Lost revenue, hiring, paying down debt. The person being insured has to know and agree in writing before the business buys the policy.
May want to explore: Businesses where one or two people drive sales, relationships, or know-how.
May not need it: Businesses that could replace the person quickly without a real financial loss.
Buy-sell funding
A buy-sell agreement, drafted by an attorney, says what happens to an owner's share if they die. Life insurance can provide money to carry it out. It can be owned by the other owners (cross-purchase) or by the business itself (entity purchase), depending on how the agreement is set up.
May want to explore: Businesses with two or more owners who want a plan for ownership transfer.
May not need it: Sole owners with no transfer plan, or owners who haven't decided what should happen yet.
Executive bonus
The business helps pay premiums on a policy the employee owns. It's sometimes used to reward and keep key employees. The bonus may count as taxable income to the employee. Ask your CPA.
May want to explore: Owners looking at ways to keep important people.
May not need it: Businesses without the cash flow to commit to ongoing payments.
Financial loss is about the money the business loses when a key person is gone. That's what key-person coverage addresses.
Ownership transfer is about who owns the business next, and how they pay for it. That's governed by a legal agreement; insurance can help fund it.
- • Premiums are an ongoing commitment. Plan for funding you can sustain.
- • Coverage requires underwriting on the insured person.
- • I don't recommend a product automatically. I start with what the business actually needs.
Have an attorney and CPA review any agreement, policy ownership, and tax treatment. Nothing here is financial, legal, or tax advice. All coverage is subject to carrier underwriting approval. Rates, availability, and policy features vary by state, age, health, and carrier. Nothing on this site is an offer of insurance or a guarantee of coverage or price.
No. Some businesses can absorb losing a person, or already have a plan. The point is to look honestly at what would happen.