Key person insurance is specifically designed to protect businesses rather than individuals or families. When a key employee, partner, or owner dies or becomes disabled, this specialized coverage provides funds directly to the business rather than to personal beneficiaries. This allows the company to manage financial impacts like revenue loss, recruitment costs, debt obligations, and operational disruptions. The business owns the policy, pays the premiums, and is the beneficiary, making it an essential business asset rather than personal protection.

Determining which team members require key person coverage involves assessing whose absence would significantly impact your business financially. Consider individuals who: generate substantial revenue or possess unique client relationships; have specialized knowledge or skills that would be difficult to replace; are responsible for critical operations; or whose absence would affect your company's credit, financing, or major contracts. Our business assessment helps identify these individuals and quantify appropriate coverage amounts based on potential revenue impact and replacement costs.

In a cross-purchase agreement, business partners personally purchase insurance on each other, and surviving partners use death benefits to buy the deceased partner's share directly from their estate. This approach works well for businesses with fewer partners and provides potential tax advantages. In an entity-purchase (or stock redemption) agreement, the business itself owns the policies on each partner and uses proceeds to purchase shares from the deceased owner's estate. This simplifies matters for businesses with multiple partners but has different tax implications. Our licensed professionals can help determine which structure best fits your business's ownership situation and tax considerations.

The ideal time to establish a buy-sell agreement is when your business is formed or when new partners join, while relationships are positive and objectives are aligned. However, if you don't currently have one, the best time is now—before any anticipated transitions or health issues arise. Waiting until a partner is nearing retirement, experiencing health problems, or considering exit makes agreements more difficult to establish and significantly more expensive to fund. Our team can help implement these crucial agreements at any stage, protecting your business from potential disputes and continuity challenges.

Business protection strategies are commonly funded through life insurance or disability policies because they provide guaranteed funds precisely when needed—when owners or key people exit the business unexpectedly. Life insurance offers advantages including tax-free benefits, predictable premiums, immediate liquidity, and leverage (relatively small premiums secure substantial benefits). Alternative funding methods include sinking funds, installment purchases, or loans, but these approaches often create cash flow challenges or uncertain outcomes. Our licensed professionals can help determine the most efficient funding approach for your specific business situation.

Business protection plans should be reviewed annually and after any significant business changes including: substantial revenue growth or decline; changes in business valuation; ownership structure changes; key personnel additions or departures; or major shifts in business strategy or operations. Business values change over time, and protection strategies must adapt accordingly to remain effective. Our team provides regular reviews to ensure your protection solutions continue to align with your evolving business needs and objectives.