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Life Insurance Policy

Can You Take a Life Insurance Policy Out on a Business Partner?

The simple answer is yes and it’s a common practice. Each partner has a vested interest in the health and life of the other. In these instances, an individual can take out the policy on their business partner, naming themselves as the beneficiary. However, the most common option is known as a buy-sell agreement. This type of policy can be used to buy back the partner’s share in the event of their demise.

Life Insurance Policy

While many individuals in a business partnership don’t think about their own health overly much, an insurance policy is an essential part of a secure succession and exit plan. Many businesses are family-owned operations and according to a PwC family business survey, only 18 percent of small business owners have considered the consequences of losing a partner and have planned accordingly.

When individuals form a partnership, the focus is on beginning and growing the business, not ending it. Insurance is far down on their to-do list. Everyone has high hopes for the success of their business and it may seem counterintuitive for individuals to make a plan if they’re unsure of their future success. A business without partner insurance is akin to a family member dying with no will. The family of the deceased often sues the company and ties up resources in litigation.

Business Partner

Business partners need to take stock of each other realistically. Each partner brings their own set of skills to the business arena. There are those that are the “face” of the business and those that work quietly behind the scenes. An honest assessment should be made of each partner’s contributions and how it would affect the operation if they suddenly weren’t there.

There are a number of life insurance policy options for those that partner and go into business. Insurance is essential protection for business partners. Partners absolutely need to have a conversation with their financial advisor or attorney to help protect themselves and their business.

For more information about how The Sena Group can help you with any

of your insurance needs, please contact us at 561-391-4661.

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The Sena Group
6501 Congress Ave., Ste. 100
Boca Raton, FL 33487