Life insurance strategies for business owners

Business owners spend years building something valuable. Yet conversations about protecting the business, its employees, and the people who depend on it can sometimes be overlooked.

For financial professionals, business-owner clients can present opportunities to look beyond personal life insurance and identify risks that may affect the long-term stability of the company.

Here are several areas worth discussing.

1. Buy-sell planning

What happens to an owner’s share of the business if they die unexpectedly?

Without a plan in place, surviving owners and family members may be left trying to determine ownership, valuation, and funding during an already difficult time.

A properly structured buy-sell arrangement can establish how ownership interests will be transferred, while life insurance may provide a source of funding for the transaction.

2. Key person coverage

Many businesses rely heavily on a small number of individuals.

That may be the founder, a top salesperson, an executive, or someone whose expertise and relationships are particularly difficult to replace.

Life insurance owned by the business on a key individual may provide financial resources that can help the company manage expenses and disruption following that person’s death.

3. Business loan protection

A business may have outstanding loans or other financial obligations that depend heavily on the continued involvement of an owner.

Life insurance can sometimes be incorporated into the broader planning strategy to help address those obligations if the insured dies.

4. Executive benefits

Competition for talented employees can make retention a major concern for business owners.

Certain life insurance strategies may be used as part of executive benefit programs intended to reward or retain key employees.

These arrangements can vary considerably, so careful case design and coordination with the client’s other professional advisors are important.

5. Succession planning

Succession planning is not only about what happens when an owner dies.

It is about creating a strategy for how the business continues, who ultimately takes control, and how ownership transitions are funded.

Life insurance may be one component of a broader succession plan.

Start with the business conversation

Rather than beginning with a product, begin with questions.

Who is essential to the company? What would happen if one of the owners died tomorrow? Is there a written succession plan? How would a buyout be funded? Are there employees the owner cannot afford to lose?

Those conversations can uncover needs that may otherwise remain unaddressed.

MVP Financial can help you evaluate business insurance opportunities, explore carrier options, assist with case design, and navigate underwriting. Contact your MVP Financial representative to discuss your next business-owner case.

For financial professional use only. Not for use with the general public.