Executive and Small Business Life Insurance

Executive Insurance Planning

Why Life Insurance?

Are you a small business owner or a co-owner/officer of a small business?  If you are, you have a need to protect your current business and your future business.  You also have your families you need to take care of; your family at work, and your family at home. 

There are many ways Life Insurance can provide all the protections you need and may be looking for.

FAQ’s

What type of life insurance should I buy?

Should I buy term life insurance or whole life insurance?

Executive Bonus Plan

Sometimes referred to as a Section 162 plan, an Executive Bonus Plan is a non-qualified plan used by an employer to provide extra compensation to key executives.  The business pays a tax-deductible bonus which the employee uses to pay the premiums for a personally owned life insurance policy. 

This bonus is taxable income to the employee.  The employee may have access to policy cash values and ultimately the beneficiary designated by the employee will receive the tax-free death proceeds. 

Considering an Executive Bonus Plan? Here are some Key Tips!

Executive Bonus Plan – Pros for the Employer:

Executive Bonus Plan – Pros for the Executive:

Executive Bonus Plan – Cons for the Executive:

Executive Bonus Plan – Cons for the Employees:

Flow Chart of a Section 162 Restricted Executive Bonus Plan

Restrictions on Access to Policy Values

Key Person Life Insurance

Most businesses have owners, executives, or officers that play a key role in the success, sustainability, and profitability of the company. 

Should a key person die, you immediately lose all the skills and talents that were so vital to the company.  You will need to recover quickly – very quickly.  Life insurance will help you do just that.  

The company can buy and own a Life insurance policy on everyone deemed a key person.  The company pays the premiums and as the beneficiary, receives the tax-free death benefit should a key employee die. 

This cash benefit can perhaps help offset lost sales and earnings, but more importantly, allow the company to quickly find and train a proper replacement.  Without these funds to allow for quick action, the company could suffer irreparable harm and damage, and may never recover.

Four key benefits of having key person life insurance:

  1. Maintain Revenue –
    When the person who is missing is a big contributor to sales and/or cash flow, the key person insurance will help to make sure sufficient funds are available until revenue can be replaced.  Even though creditors and suppliers will be sympathetic to your hardship, they too have businesses to run and so cannot afford to miss out on payment.
  2. Protect Your Assets –
    Companies often have mortgages on real estate and obligations to pay.  The person who is missing is often a key person responsible for sales and revenue.  This will be a concern to any creditor or lender, and key person insurance means that you have the foresight for this kind of situation.
  3. Cash Flow –
    If there is an interruption to the flow of funds due to the loss of a key person, it can result in a loss of market shares, a decline in sales, and an unexpected loss.  The proceeds from the insurance can help to fill the gap.
  4. Protect Existing Equity Owners
    Oftentimes, the key person is also an owner of the business, and their family will inherit his or her business assets.  Insurance owned by the company can help to pay business obligations to the family.

Owning a business is a risky endeavor and one that is best to be well prepared for.  Take the time to find out more about key person insurance today and stay protected. 

Executive Long Term Care Insurance

Most business owners provide an executive benefit package to attract, retain, and reward important team members.  A popular benefit often included is Long Term Care Insurance.  Employers are allowed to select who gets this benefit and will often pay 100% of the premium.  Premiums are tax-deductible for the business and benefits are tax-free to the executive.  Each LTC policy is different, but in general, long term care insurance can help pay for:

Other things your long term care policy may cover include training for a family member who will be your caregiver and home modifications like wheelchair ramps.  Each policy has a daily benefit amount, and most set a limit on the number of years that you can claim benefits.  

There are lifetime-benefit policies, which cost more than term-limited coverage.  Because senior-care costs are rising faster than the rate of inflation, you may want to buy a policy that offers inflation protection.  An experienced insurance broker can be very helpful in putting such a plan together. 

What does long term care insurance cover?

Think About This

It may be a pretty depressing thought, for sure, but we are all going to die one day.  Unfortunately, none of us can say how or when we will die.  That’s why it is a good idea to purchase long term care insurance.  This specialized form of insurance covers the cost of health care that extends long beyond a typical hospital stay.

On the surface, buying long term care insurance doesn’t seem to have much to do with saving for retirement.  Remember, however, that smart saving also involves spending at times.  With long term care insurance, you are actually buying a policy that protects your retirement savings. 

Having to spend your retirement nest egg on long term care – which can easily reach into the tens and even hundreds of thousands of dollars, depending on the quality and length of care – is not what you have been saving up for throughout your career.

Executive Planning Services MN

Buy-Sell Agreements

When the owner or partner in a business dies, the business must shift into survival mode and adjust quickly and effectively, or the business itself may be in peril.  A buy-sell agreement funded by Life insurance can protect you and the company from the unexpected or unintended transfer in ownership.  The sale and/or purchase of the company shares are usually based on specific events like death, disability, or retirement.  The agreement can lay out who buys, who sells, when and for how much. 

There are lifetime-benefit policies, which cost more than term-limited coverage.  Because senior-care costs are rising faster than the rate of inflation, you may want to buy a policy that offers inflation protection.  An experienced insurance broker can be very helpful in putting such a plan together. 

Are you a business owner? Here are 5 key reasons why you should have a buy-sell agreement in place:

Buy Sell Agreement Benefits

Control

Do you currently have the peace of mind in knowing that you've put the right tools into place to ensure the success of your business after you're gone?  With a buy-sell agreement, you can now have that peace of mind. 

Twin Cities life insurance

Guaranteed Buyer

With advanced planning you'll now have the certainty that the buyer is in place and there won't be questions on getting the funding secured.

St. Paul Life Insurance

Predetermined Price

With a predetermined price, you can eliminate the stress that comes from negotiations.

Executive Bonus Plans MN

Tax Relief

If the death benefit is equal to the value of the deceased’s portion of the business, there is no taxable gain for federal income tax purposes.  And, if certain requirements are met, the predetermined price in the buy-sell agreement will fix the value of the business for federal estate tax.

Benefits of Buy Sell Agreements

Treat Non-Business Family Members Fairly

Having the details hammered out ahead of time ensures your family is taken care of and not put in a compromising position.

Buy Sell Agreements

How Buy-Sell Agreements Work

Collateral Assignment / Premium Financing

When the owner or partner in a business dies, the business must shift into survival mode and adjust quickly and effectively, or the business itself may be in peril.  A buy-sell agreement funded by Life insurance can protect you and the company from the unexpected or unintended transfer in ownership.  The sale and/or purchase of the company shares are usually based on specific events like death, disability, or retirement.  The agreement can lay out who buys, who sells, when and for how much. 

There are lifetime-benefit policies, which cost more than term-limited coverage.  Because senior-care costs are rising faster than the rate of inflation, you may want to buy a policy that offers inflation protection.  An experienced insurance broker can be very helpful in putting such a plan together. 

Are you a business owner? Here are 5 key reasons why you should have a buy-sell agreement in place:

Buy Sell Agreement Benefits

Control

Do you currently have the peace of mind in knowing that you've put the right tools into place to ensure the success of your business after you're gone?  With a buy-sell agreement, you can now have that peace of mind. 

Twin Cities life insurance

Guaranteed Buyer

With advanced planning you'll now have the certainty that the buyer is in place, and there won't be questions on getting the funding secured.

St. Paul Life Insurance

Predetermined Price

With a predetermined price, you can eliminate the stress that comes from negotiations.

Executive Bonus Plans MN

Tax Relief

If the death benefit is equal to the value of the deceased’s portion of the business, there is no taxable gain for federal income tax purposes.  And, if certain requirements are met, the predetermined price in the buy-sell agreement will fix the value of the business for federal estate tax.

Benefits of Buy Sell Agreements

Treat Non-Business Family Members Fairly

Having the details hammered out ahead of time ensures your family is taken care of and not put in a compromising position.

Succession Planning

Life insurance is the key component to succession planning which requires that all owner/partners be adequately insured based on a formal valuation of the company which must be updated periodically as the company grows.  To put a plan in place will require that you work with the following expert resources to assure you have the best possible succession plan in place:  Attorney – CPA – Life Insurance Broker. 

There are lifetime-benefit policies, which cost more than term-limited coverage.  Because senior-care costs are rising faster than the rate of inflation, you may want to buy a policy that offers inflation protection.  An experienced insurance broker can be very helpful in putting such a plan together. 

Who is the best life insurance company in Minnesota?

Considering Succession Planning?
Here are 5 Key Questions you Will Need to Evaluate:

Buy Sell Agreement Benefits

What is your goal with succession planning?  Cash in?  Take some chips off the table?  Stay active in the company for a certain period?  Or have you’ve already chosen your successor, and now you’re considering ways to structure and fund the succession?

Is a buy-sell agreement that accounts for death, disability, and retirement in existence?  If so, is it signed?  Has it been reviewed?  Is it fully funded?

Using Life Insurance as Collateral

Are there insurance policies in place to meet the requirements of the buy-sell, and if so, when were they last reviewed?

Executive Bonus Plans MN

Are there any pressing reasons to implement succession sooner rather than later – e.g., health, family, divorce, or money issues?  Also, is there at least an 18-month runway available?

Benefits of Buy Sell Agreements

For succession planning, are you open to external succession, or are you looking internally only?

One Last Thing

Life insurance is the key component to succession planning which requires that all owner/partners be adequately insured based on a formal valuation of the company which must be updated periodically as the company grows.  To put a plan in place will require that you work with the following expert resources to assure you have the best possible succession plan in place:  Attorney – CPA – Life Insurance Broker. 

There are lifetime-benefit policies, which cost more than term-limited coverage.  Because senior-care costs are rising faster than the rate of inflation, you may want to buy a policy that offers inflation protection.  An experienced insurance broker can be very helpful in putting such a plan together. 

What company has the best life insurance rates in Minnesota?