Business needs of Life Insurance

Business Continuation Insurance Plan
This plan is designed to enable a business owner to provide for the continued operation if the owner dies. The insurance can be availed to fund the purchase of a deceased owner’s or partner’s share in the business.


Key Person Life Insurance/Key Employee Life Insurance
This insurance is purchased by a business on the life of a person whose continued participation in the business is necessary to its success and whose death would cause financial loss to the business. When a business purchases key person life insurance, the business owns, pays the premium on and is the beneficiary of the insurance policy.

Split Dollar Life Insurance Plans

This is an agreement under which a business provides individual life insurance policies for certain selected employees, who share in paying the cost of the policies. Under this policy the employer and employee agree to share the cost of an individual insurance policy on the life of the employee. The policy is usually in the form of a permanent life insurance and may be owned by either the employer or the employee. In either case, the employee is given the right to name the beneficiary.

Deferred Compensation Plans

This is a plan established by an employer to provide income benefits to an employee at a later date, such as after the employee’s retirement, if the employee does not voluntarily terminate employment before that. To fund the plan, the employee usually agrees to defer a portion of his salary to a future date. The employer uses this deferred portion to purchase an insurance policy on the employee’s life.

At the time of retirement, the cash value of the policy is used to fund an annuity, which will provide the employee with retirement income. In case of death of the employee before retirement, the policy proceeds will fund an annuity that will provide income benefits for the employee’s dependents.