The Reality of Life and Business

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5 questions That Will Help You think about your Life and Business from Cara Lovenson.

Businesses | Life Happens

As a small-business owner, you’re responsible for two families: the one you have at home, and the one you have through work. No matter what your business, well-conceived insurance, and benefits program is essential. If you die or become disabled, insurance can help protect your family and your business.

To get a sense of how well you’ve planned for these responsibilities, ask yourself these questions:

1. What will happen to my business and family if I die or become disabled?

2. What will happen if certain key employees die or become permanently disabled?

3. How can I attract and retain the best employees?

4. How can I help ensure that my business will be able to weather unforeseen financial hardships?

5. What will happen to my business when I retire?

Explore this section to learn more about how insurance can help protect your business while giving you a competitive edge.

Business Continuation

One of the first things any business owner needs to consider is how to protect against events that may threaten the future of the business, like the death or #disability of a #proprietor, #partner, or key employee.

Why are these agreements so important? You might think that if you die, your family could maintain their income by running the business themselves or by hiring someone to handle the day-to-day management. The fact is, your loved ones may not have the skills or the desire for the job, and your co-owners may not welcome the idea of an unintended partner. With a properly structured and funded buy-sell agreement, your business partners won’t have to scramble to come up with the money to buy out your share of the business, and you’ll be guaranteed that your survivors will be compensated fairly and promptly.

Buy-Sell Agreements 

Life insurance also can be structured to fund a buy-sell agreement. This is a contract among owners to buy a deceased owner’s share of the business at a previously agreed-upon price in the event of death, disability, or retirement.

Buy-sell agreements are typically funded by life insurance policies purchased on the lives of each of the business owners. The amount is usually specified in a contract created with the help of an attorney. You can enter into a buy-sell agreement at any time, but it often makes sense to do so when a business is formed or when new owners are brought into the business. Because business values can fluctuate, it’s important to review the contract with your accountant at least once per year or to include a calculation method in the agreement. Also, be sure the insurance coverage funding the agreement is up to date.

Business owners can also insure against the risk of becoming disabled and unable to work. In this case, disability income buyout insurance would fund the buy-sell agreement, allowing the disabled owners to be bought out, typically after a one-year waiting period.

Cara Lovenson is president of Plan Professionals, Inc., a licensed insurance consultant located in New York City. She can be reached at 212-697-2000, or by e-mail at cara@planprofessionals.com. Her Web site is planprofessionals.com

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