Most people think of life insurance as a “personal” insurance purchase, but life insurance has many uses in businesses as well. Some of the most common uses are:
1.) Employee Benefit – It’s common these days for a compensation package to include some level of “group life”, usually tied to a maximum that is a multiple of the persons salary or a set limit. Examples might be 2 times salary or a set $50,000 in coverage for all eligible employees.
2.) Key Person – This protects the owners of the company if a person who is vital to the company’s success should die. This might be your top executive, a top salesperson, the creative genius on your staff or really anyone who would be difficult to replace. Key person life insurance can help offset the loss of revenue as well as provide funds for a national search for a replacement and/or incentives for the replacement to come work for you.
3.) Buy Sell Agreements – this is also one of the most common uses of business life insurance. If a company is owned by two or more partners, it can create a very awkward situation if one of them dies. Having a buy/sell agreement in place, funded by life insurance, takes the financial burden off of the surviving partners, and provides a set amount of funds with little legal haggling to the survivors of the deceased partner.
4.) Executive Compensation – this last use of life insurance for businesses can get complicated and is best done in conjunction with a CPA and financial planner, but essentially a life insurance policy is funded by the company for the use of the executive, often providing cash value which can be borrowed out in later years to provide an alternate source of retirement income.
The are just a few of the most common ways life insurance can be used in a business setting. If you have any questions on how life insurance could benefit your business, give us a call.
About Dawson Insurance
The first independent insurance agency in Dawson County, Dawson Insurance has a history of excellence since 1964. Located in Dawsonville, Georgia, we also offer unparalleled service and competitive quotes to personal and business insurance clients in Cumming, Gainesville, Alpharetta and throughout the entire State of Georgia.