Without proper business life insurance in force the family of a deceased partner in a business could stand to lose the portion of the business that their loved worked long and hard to create, and to leave as a legacy.
A succession plan for a business, whether a buy/sell plan in a partnership, a stock redemption plan for major shareholders, or a key person policy that can determine whether a company survives the loss of that person that makes it all work, isn’t just one of those things that is nice to have.
I’ve seen partners get sticker shock when they see what it will take to fund a good business life insurance plan. But I hold out as an example two clients of mine who took out their buy/sell life insurance at ages 70 and 78. It cost the younger partner nearly $45,000 a year to pay for the older partner’s $1.5 million dollar policy but he knew that there was simply no other way to handle it. Without the insurance money he would have had to liquidate the company during the awful economic times of 2009 to pay his partner’s family their share. The older partner died at age 82 and his family received the $1.5 million just like it was planned. Was it easy paying those kind of premiums? No, but the alternative would have been even worse for the surviving partner and the deceased partner’s family.
There are plenty of reasons to skirt around the issue of business life insurance, one of those being that it is just too hard to get the insurance to fund an international or multi-national business. Take a look at the business society around us and many of the most successful businesses are those who have taken on foreign national business partners or a major foreign national stockholder. 10 years ago this would have been an insurmountable problem but with more US life insurance companies reaching out to the foreign national market, plans that would have gone unfunded a decade ago are coming together and doing the job today.
Along with the US outreach in the global market has come the expertise and pricing that US companies bring to the table in impaired risk situations. US held companies have always had an advantage when a partner, shareholder or key person has some serious health issues. But, when it comes to finding affordable impaired risk life insurance outside of the US, well, let’s just say it’s not horribly competitive. I shared recently where a business client from Jamaica was able to get life insurance through a US company for 1/4 of the price of any of the overseas counterparts. At the overseas prices he would have simply given up on life insurance as a business financial tool.
Of course there are places that US companies won’t write insurance even when there are strong US ties like a partnership. For these situations Lloyds of London has a full portfolio of international business life insurance and disability insurance products with limits high enough to handle virtually all situations.
Bottom line. Don’t be too quick to throw out a good business life insurance idea because it appears too complicated to fund. If you have any questions about multi national or impaired risk business life insurance call or email me directly.