Life insurance for business owners

Short answer: business owners use life insurance to keep the company running after a key person dies, fund buy-sell agreements between partners, cover business loans, and reward key employees. Term covers short-term needs; IUL is often used for long-term and benefit plans.

Key person insurance

The business owns a policy on an owner or employee whose loss would hurt revenue. The benefit pays the business to replace income, recruit, or reassure lenders and clients.

Buy-sell agreements

When an owner dies, the benefit buys their share at an agreed price, so the family gets paid and the remaining owners keep control. Work with an attorney on the agreement itself.

Loan protection

Lenders often require life insurance on owners for SBA and other business loans. A term policy matching the loan length is usually enough.

Executive bonus (Section 162) plans

The business pays premiums on a policy owned by a key employee, often an IUL, as a tax-deductible bonus. The employee gets coverage and cash value; the business rewards and retains talent.

Don't forget personal coverage

Your family depends on business income too. Many owners need both business coverage and personal term or IUL.

Agent tip: If your business is a big part of your net worth, plan for what happens to it, and your family, if you die suddenly.