Business Owner Life Insurance Solutions
Life insurance can play a critical role in protecting business continuity, managing risk, retaining talent, and supporting long-term planning objectives. The strategies below are presented for educational purposes only.
Indexed Universal Life (IUL) — General Overview
Indexed Universal Life insurance is a form of permanent life insurance that provides a death benefit along with the potential to accumulate cash value. Cash value growth is linked to a market index, subject to caps, participation rates, and policy charges.
- Permanent death benefit protection
- Flexible premium options (subject to policy requirements)
- Potential for tax-deferred cash value growth*
- Policy loans and withdrawals may be available*
*Policy loans and withdrawals may reduce policy values and death benefit. Tax treatment depends on individual circumstances.
Key Person Life Insurance
Key Person insurance is designed to help protect a business against the financial loss that may occur if a critical employee, owner, or executive passes away or becomes disabled.
Common Uses
- Cover lost revenue or operational disruption
- Offset recruitment and training costs
- Support credit obligations or investor confidence
Typically, the business owns the policy, pays the premiums, and is the beneficiary.
Buy-Sell Agreements Funded with Life Insurance
A buy-sell agreement outlines how ownership interests may be transferred upon death, disability, or retirement of an owner. Life insurance is often used to help fund these agreements.
Common Structures
- Entity (stock redemption) agreements
- Cross-purchase agreements
Properly structured buy-sell planning can help ensure business continuity and liquidity during ownership transitions.
Executive Bonus Plans (Section 162)
An executive bonus plan is a compensation strategy where a business provides a bonus to selected employees to purchase an individual life insurance policy.
General Characteristics
- Employee owns the policy
- Employer bonuses premiums (generally tax deductible)
- Employee selects beneficiaries
These plans are commonly used as a retention and benefit strategy for key executives.
Split Dollar Life Insurance (General Overview)
Split dollar arrangements involve sharing the costs and benefits of a life insurance policy between an employer and an employee.
General Concepts
- Employer and employee share premium costs or benefits
- May be structured as endorsement or collateral assignment
- Often used for executive retention and benefit planning
Split dollar arrangements are complex and subject to tax and regulatory rules. Professional tax and legal guidance is recommended.
Important Disclosure
This material is provided for educational purposes only and does not constitute tax, legal, or investment advice. Life insurance policies contain fees, charges, and limitations. Guarantees are based on the claims-paying ability of the issuing insurance company. Consult qualified professionals before implementing any strategy.