Term Life Insurance For Business Owners Or Key Executives

Starting a business is a stressful endeavor. There is so much
to consider regarding basic operations and so many forms to
fill out and papers to file. It is truly a wonder that
businesses are able to get off the ground at all. If you are a
new business owner, you know that insurance of all types is
very much part of the equation in the development and opening
of your business. However busy you are with the basic
operations of business, you must take time out to implement a
strategy to keep your business secure. To be sure, an essential
ingredient to this security is taking out "key person" insurance
(also known as Business Life Insurance).

Key person term life insurance is taken out on the life of the
key executive or the business owner. All firms or small
businesses depend on the key people or business owner to manage
and keep the business running. These head people are critical
for the success of the business and therefore the insurance is
actually taken out for the benefit of the business. Businesses
take out the policy on the key individuals and so the business
also pays for the policy premiums. The monies that are paid to
the business upon the death of the key executive or business
owner allows that firm or business the time to figure out what
direction to take. Those left to run the business can
strategize as to how they can save the business. Will they hire
a new head executive? Will they restructure operations? Will
they need to eventually sell off assets or sell of the business
altogether? What debts need to be paid? No matter the case, the
monies paid out by the term life insurance buys a business much
needed time to make the important decisions that need to be
made.

What Value to Place on a Key Person

To be sure, any business operation would feel displaced upon
losing its key person -- especially when considering how to
replace him/her with someone just as competent. In small firms,
it is usually the founder who holds responsibility for keeping
the books, managing employees, handling key customers and
running all basic operations. Losing the key person leaves any
company with much uncertainty and instability. There is no easy
formula for determining the value of a key employee as each
circumstance is unique. The company must consider anticipated
profit losses, replacement costs and a compensation-multiple
formula. These are typical methods of estimating a loss and
subsequent policy value. The best thing to do is to shop for
rates from several different life insurance agents as they can
help you estimate how much of a policy to buy. You may also get
term life insurance quotes online. Most agents agree that buying
term life insurance instead of a whole or variable life is
better as the premiums will be much lower.

Sole Proprietorships

Keep in mind that one-man operations do not need to take out
key person term life insurance. If you are a business with zero
employees there is no need to worry as your assets transfer to
your family (family employees do not count). If your family
depends on the income from your business, it is advisable that
you take out personal life insurance.

You do not want to overlook the importance of an investment
such as key person term life insurance. It can mean the
survival or closure of your business legacy.

About The Author: Sharon Taylor writes life insurance articles
for http://www.equote.com eQUOTE Life Insurance, offering low
rates, no-obligation quotes, term life insurance and
information. Providing financial security for American families
online since 1999.

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