If you’re a business owner or a key executive in a corporation, it goes without saying that you need insurance to cover operational costs and unexpected situations. While most people think about business insurance, what about life insurance policies that exist to help businesses move forward in the event of an untimely disability or loss of life?
There are two particular policies that come to mind:
This is a life insurance policy a company buys on the life of a top executive or other critical individuals. This insurance helps cover the company to ensure operations continue in the event something happens to this person.
This is also known as a buyout agreement. In this case, this is a life insurance policy that covers operations in the event of a departure. There are usually two types of plans – the cross-purchase plan, where each business partner will purchase a life insurance policy on the other. If the partner passes away, the remaining owners use the payout to purchase the shares of the deceased owner.
An entity, purchase, or stock redemption plan is the second option. In this instance, each employee/owner has an agreement with the business to sell their interest. Life insurance policies must be purchased on the lives of each owner. The business will pay the premiums and is listed as the owner and beneficiary of the policy. If someone passes away, that share of the company will pass on to the heirs of their estate. The business will then use the death benefit to purchase the interest from the estate.
These policies are beneficial in that they assure the remaining owners will be able to retain the business and resume operations without being passed on to someone unfit to run the operation. It also shows stability and continuity to employees, creditors, and the customer base.
For more information on protecting your business interests with these types of policies, contact an agent to discuss your options today!