InsuranceThought — Blogs About Insurance

The type of life insurance you choose to look at will, of course, depend on your specific need. Every kind of life insurance certainly does not fit each of our situations. Business owners need a particular kind of life insurance specific to the fact that they own a business. This is different than a policy written for a husband and father, a single parent, a college student, or any other individual who doesn’t have ownership in a business.

What is Life Insurance for a Business Owner?

No matter what type of business you may be in, life insurance should be at the top of your list of important financial obligations. In a corporation or partnership, each shareholder or partner would need life insurance. The survivors would use the life insurance to buy out the shares of the shareholder or partner who has died. This level of executive would typically look at level term policies initially, usually then converting them to permanent policies down the road if they intend to continue running the business for an extended period of time.

Another popular life insurance with many businesses is what’s called “key man” or “key employee” life insurance. This involves buying a policy on an employee, partner or other key individual whose death would greatly affect the company’s continued operation. This type of insurance provides sufficient funds to keep the business running until a suitable replacement for this individual should he or she die unexpectedly. Long-term level term insurance can be used for this type of policy, though permanent insurance is sometimes used as well. This would provide this employee with a lump sum or additional income when he or she retires.

Whatever life insurance you find to be best suited for you as a business owner, it is important to realize this is not an option, but a necessary expense to guard your business in the event of your or another important individual’s death.