Consider what might happen to your business if you, a business partner, or a key employee were to die or become too sick or injured to work. For most businesses, the loss of a key player who provides a significant intellectual or skill set contribution to the success of your company could have a huge impact on your business.

The following are some common strategies designed to protect your business and help offset the loss of a key players who make the biggest impact on your company’s success.

Buy-Sell Agreement Funding

A Buy-Sell Agreement serves as a Will for your company. It defines the terms of the buyout or sale of the owner’s interest in the business and can provide for a smooth transition of ownership with minimal business disruption. A properly drafted and properly funded Buy-Sell can ensure that the family of the decedent receives an accurate and timely financial award for the owner’s proportionate share of the company’s value.

• Supported by permanent or term insurance
• A type of permanent insurance, may be utilized to provide:
  • Investment growth opportunity
  • Flexible premiums
  • Potential to increase value as business value grows
  • Potential to reduce or eliminate the need for subsequent underwriting as business value grows

Business Overhead Expense Insurance

• Reimburses business owners for existing overhead expenses incurred while they are disabled
• Provides the ability for the company maintain operations while the owner recovers
  • Expenses covered may include employee salaries, rent and/or lease, utilities, and other qualifying operational expenses

BOE premiums are generally tax deductible as a business expense.*

Individual Disability Income Insurance

• Provides monthly benefits to help you maintain your standard of living while unable to work due to illness or injury
• Premium discounts may be available for businesses with three or more insured lives³

Key Person Insurance

• Supported by insurance
• Used to provide for the financial stability of your business in the event of the key employee’s untimely death or disability
• Insured are employees that have a direct impact on company earnings
  • Owners or partners
  • Key executives
  • Salespeople who consistently exceed goals
  • Salespeople or executives who have relationships with important clients
  • individuals who have specialized skills or technical knowledge that cannot easily be replaced
• Your business is named as the beneficiary
• In the event of the loss of a key employee due to death or disability, the policy proceeds are paid to the business to maintain financial stability during the search and replacement of the deceased or incapacitated employee

Because the business is the beneficiary of the death benefit, premiums are not tax deductible. Proceeds are typically exempt from federal income tax.  However, if your business is structured as a corporation, death proceeds may be subject to the corporate Alternative Minimum Tax (AMT).*

³ Discounts may be subject to state availability and underwriter approval.

*  Employers should consult with their own tax and legal advisors for further information on potential tax implications.