Business Life Insurance
Business life insurance is a vital component for any small medium or large business. In the event of premature death to the sole business owner, a partner in the business, or a key person, key man insurance can aid the business in staying financially stable until the necessary transitions can occur. Business life insurance is one area of the life insurance business that benefits both a business and the surviving family members of the deceased.
Term life insurance is often the life insurance that is used to secure the stability of such transitions. It is the most cost effective means of purchasing life insurance and it can be written for a specific term usually equaling the expected term of employment of the key person.
Key Man Insurance
Key man life insurance is used to protect a business against the premature death of a person vital to the organization. In a small proprietorship the “key man” is usually the owner. The key man can also be the top salesman for the company or the chief engineer in a manufacturing firm. The loss of this key man could be devastating to the future financial condition of the company. Depending upon the size of the business there may be more than one key person, and the company may want each vital person covered. Key man insurance provides financial protection to the firm in the event of the person’s premature death until successor plans can be implemented.
In a partnership the partners should have a “buy-sell” agreement life insurance plan drawn up addressing the premature death of a partner. “Buy-sell” agreement life insurance creates a binding and guaranteed market for the deceased partner’s share. It provides for immediate compensation to the deceased partner’s family eliminating or reducing any financial problems for the entity or surviving family members. The buy-sell insurance allows the business to continue operations without interference.
Group Life Insurance
Group term life insurance while it is sometimes used to cover particular classes of employees or partners, it is usually a benefit that the company extends to its employees. The company will contribute a portion of the premium and the employees that elect to participate would contribute the remaining monthly premium through payroll deduction.
The maximum amount each employee can buy with company contribution is normally a multiple of the employee’s annual salary. If the employee desires more coverage they are responsible for the additional premium up to the amount of coverage they select. Group term life insurance offered by companies is used as an enticement to help retain their employees.
Buying term life insurance and group term life insurance are the most cost effective forms of life insurance. Because of the flexibility regarding how long a term life policy can be written, term life policies fit the needs of partnership agreements and “key man” coverage protection.
For funding successor plans with life insurance, whether the business is a sole proprietorship, partnership, S corporation, C corporation or a LLC, the experts at Driscoll Insurance and Financial Services can help. Driscoll has been advising Pittsburgh, PA business entities regarding successor plans as well as employee benefit plans since 1976. The expert business staff can help with Group Life, Business Life, Personal Life Insurance as well as full commercial insurance protection for all businesses.