Business Protection
Key Person Insurance
This is coverage used to compensate a business for the probable business loss arising from the death of a key person. The usual guideline is to limit the coverage to five times the key person's total compensation (salary plus average bonus), although higher limits can be considered if the key person's value is fully demonstrated and rapidly increasing company growth has been established. A complete explanation should be obtained if the business has several key persons, and only one is being insured.
Business Loan Insurance
Purpose of Insurance
Life insurance can provide a secure and cost effective way of making sure that a business loan will not become a financial burden for the owner’s family or the firm. Purchasing life insurance for this purpose can:
- Provide the necessary funds to reduce or eliminate debt in the event of the business owner’s death
- Increase the credit resources of the business and protect its ongoing capacity to secure loans.
Premiums May Be Deductible
The premium cost may qualify for a tax deduction provided the policy is collaterally assigned to the lending institution. Unlike an absolute assignment, a collateral assignment does not result in a deemed disposition for tax purposes.
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