Your Business Might Need Insurance

Daniel Steinkey |

If you are a business owner or shareholder, you have many things to take care of and pitfalls to avoid. When trying to protect your business and family, there are key types of life and disability insurance you may want to consider.

Disability and Life Buy-Sell Agreements

If your business has more than one owner or shareholder, one of your concerns is what to do if one of you becomes sick or dies. You can help protect your business and your family with buy-sell agreements.

In the case of life insurance, the company buys policies for each owner. If one owner should die, the insurance policy would pay out to the deceased owner’s family and the surviving shareholder(s) retain ownership of the business. This ensures the surviving family receives fair-market value for their portion of the business, and it allows the surviving owners to continue operating the business without outside influence.

The same principle applies with disability buy-sell agreements. If one owner should become disabled and unable to work in the business, they can receive a lump-sum payment, usually after a set period of time, to buy them out of the business.

Key Person Insurance

Many businesses have one or two key people who are essential to running a business, but are not owner/shareholders. What if one of those people becomes disabled or dies? How does a business cope financially?

You can buy key-person policies that will provide payments to the disabled key person in lieu of a salary. You can also buy a plan that pays money to the business itself, to cover the costs of hiring and training a replacement and other expenses incurred when a key person dies or becomes disabled.

Life Insurance for Your Heirs

What do you do if you have multiple heirs, not all of whom work in the family business?

Most people want their heirs to receive equal assets, but giving a piece of your business to an heir who has no interest in working the business isn’t seen as fair to heirs who do. You can buy life insurance that will go to any heirs not involved in your business, while leaving actual business assets to those who do work in the business. Everyone gets equal value, even if they aren’t the same type of asset.

Office Overhead Insurance

The last type of business insurance we will look at today is office overhead insurance. If you own a business and become disabled, your business may suffer from your absence. You can buy business overhead insurance, which will cover regular business expenses while you are unable to work, such as salaries, rent and taxes. This insurance will help ensure the survival of your business, until you are ready to return to work.

Tax Treatment of Business Insurance

Business overhead expense insurance is a tax-deductible expense to the business, the rest are often paid with after-tax, corporate dollars, to make them more tax-efficient. Be sure to speak with you accountant prior to implementing any of these strategies, and be sure to work with an insurance professional, so that the insurance is properly structured to meet the needs of your business.


If you are a business owner and would like help determining if any of these insurance plans is a good idea for your business, I’d be happy to hear from you. We can work together to protect your business interests.