Let us suppose you and your
own a business that has a book value of say $1,000,000 and a going
concern value of $1,400,000.
You own 60% of the business and your partner owns 40%. Let us further suppose your partner had an automobile accident and died.
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Would you want to have his wife as your partner, or, better yet...would she want to be your partner? Do you not think you should own the whole business? Should your partner's wife not be fully compensated for the full value, that is, going concern value, of your partners share of the company.
How much life insurance for small business will depend on the needs of the particular company.
Where is the money going to come from to buy the heirs share? Suppose the wife does not want to sell. These are questions that should be answered before such an eventuality occurs.
First of all your partner and yourself need to have a buy-sell-agreement that would stipulate that in the event of the death of one of the partners the survivor would buy the shares of the deceased partner for a predetermined amount of money.
This agreement would be drawn up by an attorney and signed by both parties. This agreement is binding and should be reviewed annually.
Your partners wife would receive $560,000. That is 40% of the going concern value of the business. You would own the whole business and everybody would be happy.
I mentioned that you could use term insurance to fund the agreement. Remember...term insurance is for a specific number of years and will expire after this period. This term policy should be converted to permanent life insurance when you are able.
Use these ideas to help you determine how much life insurance for small business.
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Death proceeds from 10 year life insurance can be in lump sum form or incomr form
The 5 year term life insurance policy has been around in insurance circles for a very long time. It can be sold as a policy or as a rider to a permanent life insurance policy.
The 20 year term insurance policy is one of the most sought after life insurance policies.
Take a look at 20 pay life insurance. Most people know that you buy whole life insurance if you want to be covered for the rest of your life even if you live to age 100.