BUSINESS & EXECUTIVE CONTINUITY
When the Business Depends on You, the Coverage Has to Match
Businesses often depend heavily on a small number of people: owners, partners, executives, and other key employees whose death, disability, or unexpected departure could create an immediate financial and operational challenge.
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Business & Executive Continuity planning addresses the financial risks created by that dependence. The goal is to help the business, its owners, and the people who depend on it prepare for events that could disrupt ownership, operations, or the organization's financial stability.
Coverage Built Around the People
Behind the Business
The right continuity strategy depends on who the business relies on, how ownership is structured, and what financial obligations would remain if a key person could no longer fulfill their role. Different solutions address different parts of that risk.
Key Person Life & Disability
When a business depends financially or operationally on a particular owner, executive, or employee, losing that person can affect revenue, relationships, operations, and the ability to meet existing obligations. Key person life or disability insurance can provide the business with financial resources to manage the impact and navigate the transition.
Buy-Sell Funding
A buy-sell agreement establishes how ownership may transfer when certain events occur, but the agreement itself does not create the money needed to complete the transaction. Life and disability insurance can provide a source of funding for an ownership buyout following the death or disability of an owner, depending on how the agreement and insurance are structured.
Collateral Assignment for Business Debt
Life insurance may be used to support certain business lending arrangements when the continued involvement of an owner or other key person is important to the debt. Through a collateral assignment, a lender may receive rights to policy proceeds up to the amount of the outstanding obligation, with remaining proceeds handled according to the underlying policy and ownership structure.
Executive Retention & Benefits
Businesses may use selectively designed executive benefit arrangements to recruit, retain, and reward key people. Depending on the objective, this may include executive bonus arrangements and other strategies designed around the needs of the business and the executive.
Business Overhead Expense
Business Overhead Expense insurance can help cover certain ongoing business expenses when an insured owner or professional becomes disabled and cannot work. Coverage can provide financial breathing room while the business determines how to operate during the period of disability.
Frequently Asked Questions
Key person insurance is life or disability insurance designed to help a business manage the financial impact of losing an owner, executive, or other individual whose contribution is important to the organization. Depending on the structure, the business may own the policy and receive the benefit following a covered death or disability.
A collateral assignment gives a lender certain rights to life insurance policy proceeds as security for a debt. If the insured dies while the assignment is in effect, the lender may receive proceeds up to the amount of the outstanding obligation, with any remaining proceeds handled according to the policy and assignment terms.
Businesses should consider continuity planning when their financial performance, operations, ownership structure, or important relationships depend heavily on specific people. This can include privately held businesses, companies with multiple owners, family businesses, professional practices, and organizations with key executives or employees who would be difficult to replace.
Life insurance can provide liquidity to help complete an ownership buyout following the death of an owner. The appropriate structure depends on the buy-sell agreement, number of owners, ownership arrangement, valuation method, and how the transaction is intended to occur.
Business Overhead Expense insurance can reimburse certain covered business expenses when an insured owner or professional becomes disabled. Depending on the policy, eligible expenses may include rent, utilities, employee salaries, and other ongoing operating costs.
Yes. Disability buyout insurance may be used to help fund the purchase of an owner's interest following a qualifying long-term disability. The insurance should be coordinated with the disability provisions of the buy-sell agreement.
A Section 162 executive bonus arrangement generally allows a business to provide additional compensation to a selected employee that may be used to purchase individually owned life insurance. Tax treatment depends on the specific arrangement, so the strategy should be coordinated with the business's tax and legal advisors.