Primary life insurance can protect your small business partnerships.
- Key life insurance policies pay benefits in the event that one of the owners of a business dies.
- This also allows for a smooth transition of ownership in the event of disability or critical illness.
If you run a small business with one or more partners, what should be your priority? Making sure your operating agreement is set up? Your budget? Your business plan? While all of these are important, many business partners don’t realize that primary life insurance should be at the top of your priority list. This type of insurance is designed to protect your business in the event that one of your partners dies and can provide a financial safety net that can prevent your business from falling on hard times. Let’s take a look at how primary life insurance works and why it’s so important to small businesses.
What is key life insurance?
Key life insurance is a life insurance policy that a business buys for the life of an owner, senior executive or other critical employee. Primary life insurance provides protection in the event of the death, disability or critical illness of a business partner — without which your small business could be left vulnerable.
The money from this policy can be used to buy out the deceased partner’s share in the business. That way, surviving partners can continue to run it without having to worry about dealing with their deceased partner’s estate or family members contesting ownership rights. In addition, it can also be used to help the business replace lost revenue while they search for a replacement staff member.
Why is it important for small businesses?
For small businesses, key life insurance can be a lifesaver if one of its owners dies unexpectedly. Without this coverage, the surviving partners may have to scramble to find funds to replace the lost partner’s share or lost income in order to keep their company afloat. This could mean taking out loans or selling assets, which could further jeopardize their financial health. Primary life insurance ensures that the surviving partners do not have to worry about these issues and can focus on keeping their business successful.
Key life insurance can provide peace of mind knowing that if something were to happen to you or your partner, the remaining owner would be financially secure and have the resources needed to support operations and cover financial obligations. This type of policy also provides a buy/sell agreement that allows a business partner’s shares to be sold or transferred in the event of death, disability or critical illness. Additionally, primary life insurance policies offer tax benefits and can help with succession planning.
How do you get a policy?
The process for obtaining key life insurance is relatively simple. First, you will need to assess how much coverage will be necessary for your particular situation. This will depend on factors such as the amount of equity each partner has in the company, what assets need to be purchased or how much income needs to be replaced. Once you have determined this amount, you will need to purchase an insurer that offers coverage up to this limit. Finally, you will need to complete any paperwork required by your chosen insurer and pay any premiums due before you are fully covered by your new policy.
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Regardless of the size or type of business you run with a partner or partners, it’s important to make sure you’re all protected if something happens. Primary life insurance can provide peace of mind knowing that if something were to ever happen, there would be a financial safety net available. It also allows business owners the time and resources needed to properly grieve without adding additional stressors during such a difficult time. Make sure key life insurance is part of your business protection plan today.
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Life insurance is essential if you have dependents on you. We’ve reviewed the options and developed a best-in-class list of life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.