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Buy-Sell
Buy-Sell agreements and their funding are critical to a smooth transition of business ownership from one party to another. As a business owner, a buy-sell agreement provides a ready market for what is typically an asset without a public market. Without a buy-sell agreement, a deceased business owner's estate may be stuck with an illiquid business interest that may not be easily sold. A buy-sell agreement, properly funded with life insurance, is an ideal alternative to insure the business owner's illiquid business interest is converted to cash for the family.
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Key Person Insurance
Key person insurance, sometimes called key man insurance or key executive insurance, is designed to protect a business in the event of the death of an executive or key team member who makes a significant contribution towards the profitability or stability of the business. If a large portion of your business hinges on a few key people, you should give some thought to key man insurance.
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Who Needs It?
Key man insurance is meant to cover the company's losses in the event of the death of a key employee. That employee may be a particularly capable sales person, a manager, or the company owner – the underlying assumption is that the company will suffer greatly should that person pass away.
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What Is It?
Key man insurance is generally a term life policy, with the length of the term being the time until that employee retires. The company pays the premiums on the policy and receives the death benefits if the employee unexpectedly dies. If the employee retires, the company may choose to also surrender the insurance contract, giving the employee the chance to convert the policy to a permanent one.
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How much is needed?
Losing a key employee can harm your business in multiple ways. Your key man insurance policy must provide enough coverage to account for all costs associated with such a loss. This loss is expressed not just in immediate loss of profits or revenue; the company must also bear the costs of hiring temporary replacement staff, of conducting the search for a suitable replacement, and the new employee's training. It is vital for your company's financial health that you select the best insurance policy for your specific case. The above description is meant as a brief outline only, and does not reflect the full complexity of selecting the best insurance policy. If you wish to receive additional information, please follow this link for a key man insurance quote customized for your needs.
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