YOU ASK:

What is covered by business life insurance?

WE ANSWER:

Business life insurance provides businesses with the ability to cope with the loss of an executive, or even the loss of the owner. When a key member of the management team dies, the company will receive the death benefit to help cope up with the loss.

The insurance is designed to protect the business from financial loss that may be incurred because a key person in the company or business is no longer there to do the tasks and responsibilities that he is supposed to do. By "key person", we are referring to someone who has skills and business relationships that are important for the continued success of the company.

Even though this insurance will not completely compensate for the loss of a valued member of the business team, it will help the business get back on its feet by enabling the company to find an employee that they can train and develop. The insurance proceeds may also be used to outsource, to hire temporary employees or consultants who will help fulfill the key person's responsibilities while the replacement is in training.

For small businesses, sole proprietorships and partnerships, business life insurance becomes all the more important because there are usually a few key persons that carry a lot of responsibilities. The insurance proceeds will help the remaining owners to decide whether to keep the business, to buy out the dead key person's share or to close the company. There are, after all, some considerations with the business, as well as its heirs. The heirs may not be able to work as a team, or they may not want to continue with the business altogether.

Thus, business life insurance is bought for:

Continuation and continuity of the business
To buy time as management makes key decisions or hires someone else
Attracting employees by adding it to your employee benefits offering

Business life insurance is for all kinds of business:

Sole proprietorships
Partnerships
C Corporations
S Corporations
Limited liability companies

Along with business life insurance, you can add a critical illness rider, so that should the insured suffer from a critical illness, the business can still continue.

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