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Erin Ansalvish

Business Planning and Life Insurance

Erin Ansalvish

May 28th, 2019 | Written by

Business Planning and Life Insurance

Life insurance isn’t just needed to protect your family and loved ones, it’s also a powerful tool that business owners can use to protect their most valuable asset – their business.   Below are ways in which business planning and life insurance can help ensure that your business stays intact in case of loss of a key employee or owner, or by using life insurance as an employee benefit.

Business Planning and Life Insurance

Key Man Insurance

Most companies, especially smaller companies, have key employees that are crucial to the operation and success of a business. Key man insurance is a policy that a business purchases on the life of one of its key employees. The policy should cover the length of time that the employee would be an essential asset to the company; ideally until their retirement. If the employee were to pass away during their employment, the business would receive the death benefit. This would help them stay afloat during the transition of finding and training a replacement.  It can also strengthen the relationship with your employee by affirming their value to the company.

Buy-Sell Insurance

A buy-sell agreement is when the co-owners of a company have a written agreement on what happens to the business should one of them pass away or leave.  The buy-sell agreement is funded by a life insurance policy, whereby the owners have life insurance on each other.  If one owner was to pass away, the second owner would receive the death benefit and vice versa.  The death benefit is then used to “buy-out” the surviving spouse or family.

Executive Benefits

A good way to attract and retain employees is with decent employee benefits.  With an executive benefit life insurance policy, an employer would be the owner of a life insurance policy on an employee and the employee would select their own beneficiaries.  Typically, employers would get life insurance policies that accumulate cash as an added benefit to the employee.  There is usually a separate agreement that outlines the terms including the date in which the employee can access the cash; the date could be a vesting schedule or at a specific retirement age. It should also include terms if the employee were to leave before the agreed upon date.   The employee also benefits from these polices. When employees access the cash, they pay little tax, since the premiums were already taxed.  Also, they get to select their beneficiaries so the death benefit would go to who they named.

If you would like to incorporate one of these life insurance business planning tools in your company or would like us to review what policies you currently have in place, please do not hesitate to reach out! Call us at (410) 363-7211 or leave us a message below!

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    This information is intended for educational purposes only. It is not intended to provide any investment advice or provide the basis for any investment decisions. You should consult your financial advisor prior to making any decision based on any specific information contained herein.

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    The Prosperity Consulting Group registered as a Registered Investment Advisor (RIA) in 2005. We have with a passion for providing clients with objective investment advice and wealth management solutions. Our purpose, coupled with our fiduciary commitment, is essential in helping clients achieve their financial goals. Our firm is dedicated to providing unparalleled financial planning and investment advice to individuals, families, businesses and institutions. We have identified key areas that are critical and integral to a client’s financial success. These planning areas encompass: Investment Planning & Management Retirement Planning Estate Planning Tax Planning Business Planning Insurance Planning Income Protection & Asset Preservation Education Planning 401(k) Planning
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