It's no surprise to business owners when they hear; "you're not going to live forever..." So what happens to your business when something happens to you or your partner in business?
Even though sole ownership and small partnerships dominate the business landscape in the US, few plan to ensure that their business can survive a death to one of the main owners. This is a very important planning step if you want to ensure your family's welfare and those of your partners. Many businesses have been lost as survivors battle with living partners over who owns what...
The other thing to consider is that your survivors or your partner's may need their share of the business immediately and the cash might not be lying around to pay them off.
So what is a business owner to do?
Fortunately, this problem was addressed by insurance companies a while back and they have come up with the answer:
Key Man Insurance.
Perhaps in today's vocabulary, it should be called key person insurance but the idea is simple: the company buys life insurance policies on key employees in order to compensate the business if they were to pass away.
First, key employees are any who either have an ownership position or who are vital to the operation of the business.
Buy as much insurance as will be needed to pay their survivors (in the case of an owner) or to compensate for the loss of business (for a non-owner or a vital employee).
Policies are fully customizable to the individual being covered with a variety of options and riders available.