If you’re a business owner, you understand the value of a good partnership. Teamwork, shared goals, and mutual investments can drive your company’s success. But have you considered how to protect your shared investment if one of your partners passes away?
Life Insurance: A Critical Part of Your Business Plan
When you and your partners have invested time, money, and resources in your business, you need to have a contingency plan for unexpected events. Life insurance is a critical part of that plan.
If one of your partners dies, their share in the business passes to their beneficiaries. Without a plan in place, these beneficiaries may have little to no interest in participating in the business, which can put a strain on the partnership and the company’s future.
With life insurance, you can provide a cash payout to the beneficiaries, giving them a financial cushion and allowing your partnership to continue with the remaining partners.
Types of Life Insurance for Business Partnerships
There are two main types of life insurance that businesses can use to protect their partnerships:
- Term life insurance: Offers coverage for a specified period, typically 10-30 years. This type of insurance is often less expensive than other options.
- Permanent life insurance: Offers coverage for life and often includes a savings component. This type of insurance can be more expensive but may be a better fit for long-term partnerships.
Your specific business needs and goals will determine which type of life insurance is best for you.
How Much Life Insurance Should Your Partnership Have?
There is no one-size-fits-all answer to this question. Your partnership should have enough life insurance to cover any outstanding debts, buy out the deceased partner’s share in the business, and provide a financial cushion for the beneficiaries.
Sit down with your partners and a financial advisor to determine the appropriate amount of coverage for your specific business needs.
Make Life Insurance Part of Your Partnership Agreement
Once you’ve determined the right type and amount of life insurance for your partnership, make sure to include it in your partnership agreement. This agreement should outline what happens in the event of a partner’s death, including how the insurance payout will be used to protect the business and the remaining partners.
Having a written agreement can help prevent confusion and conflict in an already difficult time.
Connect with Our Team to Learn More
If you’re a business owner with a partnership, it’s important to protect your mutual investments with life insurance. At Bank Owned Life Insurance, we can help you navigate the world of life insurance and find the right solution for your business.
Contact our team today to learn more and start protecting your partnership for the future.