September 2007

WHEN TRAGEDY STRIKES, INSURANCE CAN HELP

The death or disability of an owner or key executive can have a devastating effect on any company. To keep the business going, you need to take such precautions as setting aside an emergency reserve fund and having a continuation plan in place. It’s also essential to have the right insurance on key personnel. Consider these options:

• A buy-sell agreement financed by Life insurance. In a partnership each partner holds a Life policy on the other. The surviving partner uses the insurance payout to buy the stock of the deceased partner from their family. This type of agreement is used when the owners don’t plan to pass the business to other family members.
• Key Person Life insurance. This is similar to a buy-sell agreement, but with the business as the beneficiary of the policy. Key Person plans are less common: Only 17% of businesses with fewer than 500 employees have this coverage on their chief executives, according to a 2003 study by Hay Group.
• Medical or Disability insurance. A Disability policy can pay the overhead expenses of a business and/or replace up to 60% of lost income. Make sure that the policy covers partial disability — which is more common that total disability.

If you’d like professional advice on reevaluating and revising these policies, give us a call.