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By: Andrea Moyerimage of business partners

Do you own a business?  Are you in partnership with another party?  Here are a few things to consider in the event of the death of a business partner.  What kind of responsibilities would you now face?

Buy/Sell Agreements

When do you, the business owner, need to consider life insurance?  Well, the answer is when your business is small and just starting out.  Unless you’re unambitious, your business won’t stay small – it will grow and you want your assets protected as they grow with it.  Life insurance for businesses, called a “Buy/Sell Agreement” policy, is based on a predetermined value of the business. 

If a business partner dies, the surviving partner typically has nine months to settle the estate.  A policy is purchased, usually involving a lawyer, on whatever the value is considered to be.  The death benefit goes to the surviving partner and covers him/her in the event that the family of the deceased business partner decides that the business is worth more than the predetermined amount.  With the life insurance policy in place, the family of the deceased cannot declare that the business is worth more and that therefore they are owed more money.

However, if there’s no life insurance, the surviving partner may be compelled to buy out the deceased partner’s half of the business.  He or she may be in no position to do this and might have to consider going into business with the deceased’s family members in order to satisfy the debt.  A good question to keep in mind is, “would I want to be in business with my partner’s family?”

Another scenario might include selling off all of the company’s assets to pay the family of the deceased what they believe is rightfully owed to them.  Would you want to have to do this?  A Buy/Sell Agreement policy covers you in this situation.

What do businesses need to consider when purchasing a life insurance policy?  Purchasing additional life insurance as the business grows.  Let’s say a business partnership consists of three members.  Two of them have life insurance but the third does not.  The first two business partners would need to purchase enough life insurance to cover themselves in the event of the death of the third. 

Make a quick phone call to one of our offices – Perkasie (215) 257-9171 or Harleysville (215) 723-9805 – and get a free needs analysis. We’ll help you decide what coverage is right for you and what will fit your needs and budget – and your business.

Now is the time – because life happens!

Also Read: Life Insurance, Beneficiaries and Divorce

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