Life Insurance Strategies for Business Owners

Life insurance offers unique applications for business owners:

Key Person Insurance:

• Purpose: Protects the business from financial loss if a key employee or partner dies.
• Structure: The business owns the policy, pays the premiums, and is the beneficiary.
• Benefits: Helps cover recruiting and training expenses for replacements or the financial losses due to the loss of the key person.

Buy-Sell Agreements:

• Purpose: Ensures a smooth transfer of business ownership if a partner passes away.
• How It Works: Partners purchase life insurance policies on each other. If one passes, the death benefit is used to buy their share, ensuring continuity of ownership for the remaining partners.

Executive Bonus Plans:

• Purpose: Attracts and retains key employees by offering life insurance benefits as a form of compensation.
• How It Works: The business pays the premiums, but the policy is owned by the employee. This strategy is often used as an employee retention tool.