Business Life Insurance
Business life insurance is essential to small businesses, especially partnerships or sole proprietorships. The proceeds from business life insurance can help a business continue if a key employee, partner, or owner dies. Business life insurance can also be used to buy company shares or buy out partnerships providing the person’s heirs with quick cash, or it can be used to hire and train a replacement for the deceased person, similar to key man life insurance. There many different types of business life insurance.
Key Man Insurance
Key man insurance is a type of life insurance purchased by businesses and corporations to cover the expenses of replacing a key employee or in some cases, to purchase company shares owned by the person who died. The loss of an important employee can devastate a business and cause serious short term losses. Key man life insurance can provide the cash to keep the company viable. It is the only business life insurance with premiums that are tax deductible as a business expense.
Survivorship Life Insurance
For business partnerships, a first to die, second to die, or survivorship life insurance policy may provide the best coverage to keep the business financially solvent. Survivorship life insurance provides business life insurance for both partners, but only pays the death benefit once, upon the death of the first partner. A survivorship policy is more affordable than purchasing two separate life insurance policies for the business partners and will provide funds for the second partner to continue the business if the first partner dies.
Sole Proprietorship and Business Life Insurance
When the sole proprietor of a business dies, the business may have outstanding debts or expenses necessary to dissolve the business. If the heirs keep the business, they may need funds to continue daily operations in the short term. It is important for sole proprietors to carry life insurance with the business as the beneficiary, so heirs do not have to pay for legal and other business related expenses. If a business owner dies, the business expenses may be deducted from his or her estate, leaving nothing for heirs.
Business and Financial Planning Includes Life Insurance
If a person owns a substantial part of a business, his or her heirs inherit that asset when he or she dies. Their heirs may wish to sell their share of the business or to liquidate business assets for cash. Business life insurance allows surviving business owners and partners to maintain control of shares and assets by paying heirs the value of their inheritance, essentially buying their interest/ownership in the business. Owners and business partners should have legal contracts which give them the sole right to buy the heir’s interests.
Businesses and corporations should also consider offering their employees group life insurance as part of employee benefits. Group term life insurance makes term life insurance for employees and individuals much cheaper, and is the most common use of term life insurance for business needs.
Death, Taxes and Family Businesses
While the premiums of business life insurance may or may not be tax deductible, the proceeds of life insurance death benefits are not subject to income taxes. Family members who are partners and inherit the other partner’s share of a business may have to pay income tax or inheritance tax on the business assets. A business life insurance policy can cover these expenses so they do not have to be paid from the business assets or the partner’s personal wealth or funds.
Life Insurance Quotes Online
Small and large businesses can benefit from business life insurance, which provides funds to keep businesses operating in the event of the death of an owner or vital, key employee. Any business plan should include life insurance for those who make a significant contribution to the operation of the business.
Enter your zip code to begin comparing life insurance quotes online, and find the best business life insurance for you, your business, and partnerships needs. Life insurance quotes can help business owners and partners choose the right life insurance policy by comparing policies, coverage, life insurance rates and companies.
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