Small Business Owners
"For business owners, there are many reasons to think about insurance. From group benefits to retention of key employees."
Insurance is used by business owners on employees to financially safeguard their business in case of a longterm injury, illness, and even death. Other times insurance can be used as a supplemental retirement plan for key employees.
Below are some of the more common reasons that a business owner might consider insurance.
Key Person
Insurance
Business owners use Key-Person Life Insurance or Disability Insurance on key employees who are vital in keeping the company running smoothly. These plans can soften the financial loss if the business loses a key employee.
Buy/Sell
Agreement
Life Insurance and/or Disability Insurance can be used to fund Buy/Sell Agreements between business partners. In case of an unforeseen event to one of the business partners, the Buy/Sell Agreement is funded to "buy out" that business partner's surviving spouse (and/or surviving family).
Group
Benefits
For business owners, offering group benefits is an excellent incentive for employee retention. Most business owners, and their employees, can make premium payments using pre-tax dollars, which allows the business owners a significant tax write-off as well.
Life Insurance for the Business Owner
For business owners, permanent life insurance plans, specifically Indexed Universal Life (IUL) insurance plans, can be used to supplement and reduce income taxes for themselves and other key employees... Allowing business owners the ability to pick and choose which employee (or employees) would benefit from these plans. Many business owners utilize IUL's on key, designated employees as BOTH a Key-Person Insurance plan, AND a supplemental retirement plan. Essentially meeting two important needs with one plan.
In addition business owners who want to protect and incentivize a key employee might also utilize a Key Executive Bonus Agreement Plan (often referred to as a Section 162 plan). Many times, this can created using permanent life insurance, and more specifically, Indexed Universal Life insurance.