Life Insurance Products

Do I have adequate insurance coverage?

Insurance protection products are the cornerstone of any financial plan, protecting your paycheck and your family against financial risk.

Life Insurance provides a death benefit to your family if you should die prematurely, helping them pay the bills when your income should suddenly cease. But far too many Americans are either under or over insured. Others have the wrong type or amount of coverage for their specific needs. For example, term insurance is least expensive because it provides a benefit for a limited amount of time, while permanent life insurance (which includes whole life insurance) is more costly but provides a guaranteed tax-free death benefit to your heirs regardless of how long you live, provided your policy remains in force. In addition to the death benefit protection, permanent life insurance can be designed to provide a source of future retirement income as needed. Your financial professional can offer guidance on how much life insurance protection your family needs and which type of coverage makes sense for you.
Disability Income Insurance (DI), on the other hand, protects a percentage of your income in the event that you should become too ill or injured to work. Many workers mistakenly assume that their employer-sponsored DI coverage is enough. In fact, any benefits offered through employers may be taxable, it may limit coverage to your base salary, it may not provide coverage if you are able to work in even a minimum-wage job, and it may not be portable — meaning you may not be able to take the policy with you after you leave your job. Check your policy to be sure that you have the coverage you need.
Long-term care insurance offers a number of financial features that can protect both you and your family. By covering part of your expenses if you should require costly assisted living or residential care.

Ensuring the financial security of the people who depend on you is an important responsibility. Life Insurance helps provide financial protection and can play an important role in your financial plan.

* Term Life
Coverage for a specific period (10-30 years), affordable premiums, no cash value

* Whole Life
Lifetime coverage with fixed premiums and guaranteed cash value growth

* Universal Life (UL)
Flexible premiums and death benefits with cash value component

*Indexed Universal Life (IUL)
Cash value linked to market index performance with downside protection

* Variable Universal Life (VUL)
Cash value invested in market sub-accounts with higher risk/reward potential

Specialize in Protecting Business Owners and Entrepreneurs

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What Is the Purpose of Key Person Insurance?

Key person insurance is designed to pay a life insurance death benefit to a business rather than individual beneficiaries if the insured person dies.

Every small business should have a contingency plan for worst-case scenarios. That includes what to do if a crucial member of the business dies. Fortunately, tools are available to help business owners navigate this exact scenario, including key person insurance. You may hear “key person insurance” called “key man insurance” or “key woman insurance.”
The business typically pays the premiums on this type of life insurance, and the insured person must give written consent to the company owning the policy.

What is a Key Person?

The “key person” named on the policy is someone who is considered essential to running the business, whether it’s an owner/partner, top executive or someone with specialized knowledge and skills. Losing this person would cause the business to suffer financially, as it would be difficult and/or expensive to replace them, or because they bring in a significant amount of revenue.

Who Needs Key Person Insurance?

If you run a business by yourself, you probably don’t need key person life insurance. But if you have a business partner or a certain employee who is invaluable to the company, it’s a good idea to be insured. In fact, some commercial lenders may even require key person life insurance for certain individuals, so it’s something to consider if you’re looking to expand your business with a loan.

What Does Key Person Insurance Cover?

Key person insurance provides a death benefit to a business so that it can continue operating if the key person dies. There are no restrictions on how the death benefit is spent. The funds can be used for any expense, including daily operational costs, training a new hire or paying off debt.
In some cases, closing down the business is the best course of action, in which case the death benefit can help ease the transition by covering costs such as paying out severance to employees, distributing funds to investors, paying off creditors and more.

How Much Key Person Insurance Coverage Do You Need?

A good rule of thumb is to buy key person coverage between eight to 10 times the person’s salary.
Another way to determine coverage needs is to identify the key person’s monetary value to the business. Doing this can be challenging but is a more precise way to identify coverage needs.

Tax Considerations for Key Person Insurance

Life insurance premiums are not tax deductible typically and can’t be counted as a business expense. However, the life insurance death benefit is paid tax-free to the beneficiary.If you have a permanent life insurance policy, any cash value grows tax-deferred. Plus, the business can usually borrow against the cash value without creating a taxable event.
“In some instances where a business owner owns the life insurance policy—rather than the business—the business may be able to deduct the premiums as compensation to the owner.

Key Person Insurance and Buy-Sell Agreements

In addition to key person life insurance, it’s a good idea for small business partners to consider a buy-sell agreement. This type of agreement is funded by life insurance and states that if one partner dies, or becomes so disabled they can’t function, the other partner has the legal right to buy out their stake in the company.
The life insurance payout provides the funds for the partner to do this.
A buy-sell agreement is a binding legal document and should be updated on a regular basis as the business’s earnings and balance sheet change.
There are two main types of buy-sell agreements:

Cross-purchase agreements. With this type of agreement, business partners purchase a key person life insurance policy on each other so that if one passes away, the other can keep the business going or buy out the deceased partner’s family.
Entity purchase or stock redemption agreements. With this type of agreement, the business owner uses life insurance proceeds to purchase an owner’s shares if they pass away.

Life Insurance Products

Do I have adequate insurance coverage?

Specialize in Protecting Business Owners and Entrepreneurs

Key Person Insurance and Buy-Sell Agreements

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