Business Insurance

What is Business Insurance?

Business insurance protects your investment by minimizing financial risks associated with unexpected events such as a death of a partner, an injured employee, a lawsuit, or a natural disaster.

It’s also a broad name for different coverages available to the business owner to protect against losses and to ensure the continuing operation of the business.

Major Types of Business Insurance

Key Person Insurance

  • Key person insurance is simply life insurance on the key person in a business. In a small business, this is usually the owner, the founders or perhaps a key employee or two. These are the people who are crucial to a business–the ones whose absence would sink the company.Here’s how key person insurance works: A company purchases a life insurance policy on its key employee(s), pays the premiums and is the beneficiary of the policy. If that person unexpectedly dies, the company receives the insurance payoff.  The death of a key person in a small company can cause the immediate death of that company. The purpose of key person insurance is to help the company survive the blow of losing the person who makes the business work.How do you determine who needs this insurance? Look at your business and think about who is irreplaceable in the short term. In many small businesses, it’s the owner who holds the company together–he may keep the books, manage the employees, handle the key customers and so on. If that person is gone, the business pretty much stops.

Buy-Sell Agreements

  • A buy-sell agreement, also known as a buyout, is designed to protect or continue a business should it experience an unforeseen circumstance. If a co-owner wants out of the business, to retire, to sell their shares to someone else, goes through a divorce or passes away, a buy-sell agreement acts as a sort of “premarital agreement” to protect everyone’s interests, setting the price and terms for a buyout. These are binding contracts between co-owners that control when owners can sell their interest, who can buy an owner’s interest and what price will be paid.

    Buy-sell agreements can be used to lower estate taxes in businesses where at least one co-owner plans to leave the interest to heirs who will remain active in the business. This can help a family business owner pass the business on to children or other relatives without burdening them with unnecessary estate taxes caused by an aggressive value of the business. The key for estate planning is choosing a conservative price or valuation formula for the business in the buy-sell or buyout agreement. The result can be to legally set the value of the ownership interest at an amount considerably lower than its sales value at the time of death.

    Most buy-sells are funded with life insurance because it is the only means of guaranteeing that death, the event which creates the need for cash, also, creates the cash to satisfy that need.

Group Health Insurance

  • Group health insurance coverage is a policy that is purchased by an employer and is offered to eligible employees of the company (and often to the employees’ family members) as a benefit of working for that company. A group health insurance plan is a major part of many employee benefits packages that employers provide for their employees.

Group Life Insurance

  • Group life insurance (also known as wholesale life insurance or institutional life insurance) is term insurance covering a group of people, usually employees of a company, members of a union or association, or members of a pension or superannuation fund. Individual proof of insurability is not normally a consideration in the underwriting. Rather, the underwriter considers the size, turnover, and financial strength of the group.

Group Disability Insurance

  • Group Disability Insurance is a type of group insurance that provides regular income replacement payments to an insured member of the group in the event of an eligible disability resulting from illness or injury. Coverage is generally offered in two types: short-term disability (STD) or long-term disability (LTD).

Contact us to learn more about the right business insurance for you.

 

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