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Life Insurance for Your Business

We all know how important life insurance is for your family. It not only pays your funeral expenses – taking that burden off your family – but it also replaces your income, pays off your family’s debt, pays for college funds and counseling, and can even supplement your spouse’s retirement plan contributions. But what about your business? How can a life insurance policy help your business after you or an important employee have passed on?

Buy-Sell Agreements

If you are in a business partnership with another individual or group of individuals, then your life insurance policy can serve as a means for buying the business after death. For instance, let’s say you have a 50/50 partnership with another individual. You can each buy a life insurance policy on the other with that business partner’s family or estate set as their beneficiary. Then, you can draw up an agreement that states that the death benefit on the life insurance serves as the funds needed to buy the other business partner out after his or her death. That way, you do not need to extract funds from the business in order to buy the partner’s family out of their business interest after the partner’s death.

Key-Person Insurance

If you have a key employee – one who will not be easy to replace because the role they play in your business is specialized – then you may be able to buy a life insurance policy on that individual with your business as the beneficiary. This will compensate your business monetarily for the loss of the employee and can give you the funds you need to bridge any financial gaps left by the key employee’s death.

Whether you decide to get key-person insurance or a insurance for a buy-sell agreement, you do not need to get any kind of special policy – just a normal life insurance policy will suffice. Although you may need to draw up legal documents to support the purchase and agreements.


November 26, 2010



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