Most businesses insure their buildings and equipment, but forget to insure the people who make it all run. What would happen to your revenue if your top salesperson or operations manager died tomorrow?
The business buys a life insurance policy on a key employee. The business pays the premiums and is the beneficiary. If that person dies, the business receives the death benefit tax-free.
The money can be used to recruit and train a replacement, pay off business debts, or cover lost revenue during the transition period. It's strictly a business survival tool.
Often required by SBA lenders. If you take out a business loan, the bank will want collateral in the form of a life insurance assignment to pay off the loan if you die.
Someone responsible for 30-50% of the company's revenue. Losing them could cripple cash flow.
The lead engineer or developer who holds all the institutional knowledge of your product.
Alternatively, the business can pay the premiums for a policy OWNED by the employee as a taxable bonus. This is a great retention tool ("Golden Handcuffs").
Get a custom Key Person proposal.
Generally, NO. If the business is the beneficiary, premiums are not deductible. However, the death benefit is received INCOME TAX-FREE. (Consult your CPA for specifics).
The business can surrender the policy (and get any cash value back) OR transfer the policy to the departing employee as a bonus or for a purchase price. It is the business's asset to control.