Wisconsin Life Insurance Lawyer

Life Insurance for Business Owners

Life insurance is particularly useful in business frameworks, where 2 or more partners own a company together. If one partner were to die, or even a “key” employee, the life insurance policy would provide a payout to cover the fallout and financial loss from such a person’s passing. For example, in a business owned by 2 owners, the partners likely desire for their spouse and/or children to receive their share of the company’s equity upon their deaths. However, forcing the surviving partner to come up with enough cash to fully buyout half of the business’ fair market equity from the deceased partner’s family, without any warning or prior planning, could be catastrophic and ruin the business itself by liquidating too much of its cash and assets at once. To solve this problem, business partners will often set up “keyman” life insurance policies, which provide funds for paying off a deceased partner’s heirs for their share of the business equity, while not causing a disruption in the business’s cash flow and operating account. You should consult an attorney to create a proper legal framework to manage any “keyman” policy, such as by creating a Life Insurance Trust and/or amending your company’s internal corporate documents to put rules and terms into place as to how the life insurance payout will be managed and distributed in the event of a death. It is not wise to simply list your spouse or business partner as the primary beneficiary of the policy. Go a level deeper and execute appropriate legal documents that bind everyone involved into a controlled framework for this most sensitive and important payout and transfer.

Life insurance should also be engaged if you loan any person or entity a large amount of money, such as a private mortgage, promissory note, or other loan to your friends, family, or business associates. By insuring the debtor’s life, you as the lender will have more security that your money will actually be repaid, regardless of an unexpected death. Most banks and financial institutions engage life insurance of some sort for the majority of their loans – you should too!