Business Life Insurance

Livonia, Farmington Hills, Michigan

At Insurance Planning Service, we undersand that Life Insurance can be very important to a business.  Businesses can purchase term or permanent forms of insurance, just as individuals can, but the uses of Life Insurance within a business are different.

Here are several examples of how Life Insurance can used by a business:

Group Term Life – purchased on a group basis for the benefit of employees’ beneficiaries.  The business pays for the insurance on the life of its eligible employees.  The employee names their beneficiary.  Premiums for insurance amounts up to $50,000 are tax deductible to the business.

Buy & Sell Agreements can be funded with life insurance that will guarantee a smooth transition of ownership in the event a partner or stockholder dies.  When the buy & sell agreement is set up on a stock redemption basis, the business purchases a life insurance policy on the life of each owner or stockholder.  The business is the owner and the beneficiary of the policy.  Upon death of a stockholder, the proceeds are then used to purchase the stock of the deceased owner from his/her spouse or estate.  When a cross purchase agreement is used, each partner / stockholder purchases a life insurance policy on the other owner(s) so that proceeds can be used to purchase the deceased partner’s share of ownership.  If a permanent form of insurance is used, cash value that has accumulated within the policy can also be used to assist when an owner must sell his/her share due to disability.

Executive Bonus Plan, (IRC Section 162), can be used to provide additional compensation for key employees of a business where the business purchases a life insurance policy on the key employee.  Premiums are deductible to the business and taxable to the employee, but the employee owns the policy, controls the cash value and names the beneficiary.  If the employee leaves the employer, the policy belongs to the employee and he/she can continue to pay premiums and retain the policy.

Key Person insurance is a Life Insurance policy on the life of a key person in a business for the benefit of the business.  The business owns the policy and the business is the beneficiary.  The death benefit can be used to provide funding to offset additional expenses that arise when a key employee dies.  To avoid taxation of benefits, premiums are not a deductible expense.

Choosing the appropriate form of Life Insurance for your business can be a daunting task.  We can work with you, your attorney or your CPA to make sure your plan accomplishes the goals of your business.

Be sure to ask us about other important parts of your insurance program, including: Commercial Auto; General Liability; Commercial Property; Workers Compensation; Umbrella Liability;  Bonds.