Business Insurance

Protecting for your livelihood is as important as protecting yourself

You’ve worked hard to build your business and should make sure the time, blood, sweat, and tears you’ve invested are protected if something should happen to you, a partner, or key employee. Life insurance and disability insurance can meet the protection needs for many aspects of a business. Here are a few examples of how the right insurance coverage can benefit you:

1. Key Person Insurance

You’ve probably heard people say that anyone can be replaced. This is true sometimes more than others. The reality is that some members of your team are more critical to your day-to-day operations than others and would be considered a key person.

You, as an owner, would be considered a key person. An employee with propriety knowledge or a sales person who manages key relationships for your business would also be considered a key person.

The point of insuring a key person is to protect the business if something should happen to that person if they leave for other opportunities. While the loss of a key person can be mitigated over time, the immediate disruption to a business can be devastating.

Think about your business and make a list of key people that are integral to your business. Purchasing key person insurance may be important to your business even if you are the only one on your list.

2. Buy-Sell Agreements and Insurance

You should have a buy-sell agreement – and insurance policies in place to support it – if you have partners in your business. A buy-sell agreement protects you and your partners if one of you should pass away while still an owner of the business.

Insurance policies are an important part of buy-sell agreements. The business is the owner and the beneficiary of the life insurance policy and the business owner is the insured. There is an individual life insurance policy for each owner.

There is cross purchase language in your agreement that obligates your partner’s heirs to sell that partner’s ownership in the business back to you and your other partners in the event of their death. The business, as the beneficiary of the insurance policy, then uses the death benefit paid to pay your partner’s heirs for their ownership interest in the business.

A buy-sell agreement is a great way to keep continuity of a business during what could be a difficult time.

3. Business Overhead Expense (BOE) Insurance

One example of how disability insurance can be used to help protect your business is business overhead expense (BOE) insurance. BOE is disability insurance that pays the business expenses associated with the owner of the business while they are disabled.

Business owner expense insurance pays all expenses including payroll, except for the owner’s compensation. The owner’s compensation is generally covered by a separate disability insurance policy.

The premiums of a BOE policy are deductible, but benefits are taxable. As the benefits are used to pay operating costs, however, the addition to taxable income is offset by deductible expenses.

These are just a few examples of how insurance can play a vital role in the continued success of your business. Contact us for more to learn more ways and specific examples of how a life insurance or disability insurance policy can assist your business.

Feel free to contact us for a customized solution.

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