🏢 Business Ownership
Business owners have personal insurance needs — and additional business-related needs. Understanding both is important for protecting what you've built.
What makes business owners different?
A business owner's death can affect not just their personal family — but their business, business partners, employees, and creditors. Several categories of life insurance are relevant:
- Personal life insurance — the same as any individual, covering family obligations
- Business loan protection — coverage for personally guaranteed business debt
- Key-person insurance — covers the business against the financial loss from the death of a critical person
- Shareholder/partner buyout insurance — funds a surviving partner's purchase of the deceased's business interest
Key-person insurance
Some businesses depend on one or a few individuals — a founder, a rainmaker, a technical expert. If that person died, the business might struggle to continue. Key-person insurance is owned by the business and pays the death benefit to the business, giving it financial resources to recruit a replacement, manage revenue loss, or wind down operations orderly.
Shareholder agreements and life insurance
When a business has multiple owners, a shareholders agreement often specifies what happens if one owner dies. Commonly, the remaining owners have the right or obligation to buy out the deceased's share from their estate. This requires funding — which life insurance can provide, with each owner insured for the value of their business interest.
Questions to ask an insurance advisor
- What personally guaranteed business debt needs to be covered?
- Who are the key people in my business, and what is their replacement cost?
- Does my shareholders agreement require life insurance, and is that insurance current?
- Should business insurance be owned personally or by the corporation?
- Are there tax implications of corporate-owned life insurance?
Registry resources
Important note
Business life insurance planning involves tax, corporate, and legal considerations that go beyond what a general educational tool can cover. Professional legal, accounting, and insurance advice is especially important in this area.