Life insurance for business owners: Should you have it? Life insurance provides financial security for your family if you were to die prematurely. When you’re a business owner, however, there are more people counting on you. For everyone involved, from your business partners to your employees, a life insurance policy can play a pivotal role in the continuity of your business. More often than not, people are the largest asset in a company. As a business owner, there’s an important financial dynamic to your value. Having life insurance makes a lot of business sense.

Buy-sell agreement life insurance A buy-sell agreement is beneficial if a business owner has a partner and would prefer not to work with the partner’s family members if the partner passes away prematurely. Life insurance proceeds can be used to purchase the business shares from the deceased partner’s estate.

Key person life insurance Life insurance can also be used to provide cash for the business if a key person were to pass away. The insurance proceeds provide a financial cushion while the business works through the loss of the individual’s contributions to the business. Owners can purchase a policy that funds a specific outcome they’re trying to achieve or can potentially use a policy to fund multiple objectives. For example, the company may take out a policy that includes key person insurance for $1,000,000. Three quarters of that policy could be used to offset the financial loss to the business if the employee passes away, while the remainder could go to the key person’s spouse as a salary continuation. Consulting a financial advisor can help navigate the process. An advisor can identify risks that the business owner might not have been thinking about and trusted advisors, CPAs, and attorneys can help strategize concepts that address those risks. The advisor is uniquely qualified to help the owner determine the policy type that best matches with the strategy. They may also help the business owner find the premium dollars to fund their policies, too.