Corporate-owned insurance

Protect your business’ continuity against the passing of a shareholder or key person

Just like taking out a personal insurance policies to provide for your loved ones in the event of a serious illness, injury or death, corporations can hold insurance policies on shareholders and key members of the business.

Having a corporate-owned insurance policy can help your business continue operating and providing for the people that count on it for their financial security.

What Is corporate-owned insurance?

Corporate-owned insurance policies are just that: insurance policies taken out and held by the corporation. The corporation pays the regular premiums and if anything happens to the named insured person, the company is the beneficiary.

A corporate-owned insurance policy is typically taken out to insure the life or well-being of someone who is vitally important to the operation of a business or to allow a shareholder’s shares to be efficiently managed in the event of their death.

For example, if a business is built around a single person who has a very specialized and very valuable skill, the business would suffer immensely if something were to happen to that person or if they were to pass away. In this situation, the company would be the beneficiary of the policy payout, allowing the company time to find and cover the costs of hiring and training a replacement person.

Another use case for corporate-owned insurance would be if a key shareholder passed away. The payout of the corporate-owned insurance policy would allow the remaining shareholders to buy that persons shares back, allowing the surviving shareholders to continue with the operation of the company.

Corporate-owned insurance is commonly known as keyman/keywoman/keyperson insurance or business life insurance.

Putting the right corporate-owned insurance policies in place can help protect your business investments and allow your legacy to live on in your continuing business operation. Let us help guide you along the path of protecting what matters most to you and your business.

Why your business might need corporate-owned insurance

Corporate-owned insurance protects the business against the injury, illness or death of key people that are vital to the on-going operation of the business. Some common reasons businesses invest in these types of policies include:

• Loan protection – if your business is applying for a loan, the lending institution might require the organization hold insurance policies on the owners, key shareholders, or key people within the business so that their interests are protected in the event of unforeseen misfortune.
• Sales contract – if you’re a smaller business and you provide vital products or services to other businesses, they might require that you carry corporate-owned insurance on key people within your organization. If something happens to one of your key people, they’ll want the assurance that your business can continue serving them with minimal impact to their business.
• Partnership agreements – if you’re part of a business with one or more other partners, your partnership agreement might require that the business take out an insurance policy on your life. If something happens to you or one of the other partners, the policy payout helps the surviving partners continue running the business and buy your shares from your estate, minimizing the disruption on the business’ continued operation.

If you’ve built value in your business or want to protect it against the passing of you, one of your partners, or someone that is vital to its operation, you need corporate-owned insurance. Get in touch and let us light the path of protecting your business’ financial security.

Changing with your business’ life phases

When you’re just starting your business, having a corporate-owned insurance policy might be the furthest thing from your mind. You’re focused on the excitement of getting started and finding those first customers to sell to.

But as your business grows, your insurance needs will change. As you grow your team and their financial security depends on the operation of your business, you should take precautions to make sure your business can continue operating even if you pass away unexpectedly. Getting a bank loan or landing a huge contract might require the organization hold life insurance policies on key people in your business. As you start thinking about how you’ll exit the business – whether you’re going to pass the business over to your children or sell your shares to an investor – having the right corporate-owned insurance policies in place will make that a smoother transition.

As your personal and business financial security partner, let us help guide you along the path of protecting what matters most to you as your business evolves through the different phases of its growth. Get in touch, let’s have a chat.