Ahwatukee Living’s Ask the Experts

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Tips on Business Insurance

Busy Business Life?
As a business owner, you spend many hours working and developing your business. But have you thought about what would happen to your business should you or your partner become disabled or die? To preserve the future of your business, it is important that you create a business continuation plan. Such plans often include a "buy-sell" agreement. A buy-sell agreement, funded by life insurance and written while the owners are alive, ensures that your heirs can sell their share of the business to surviving owners - and that the surviving owners can buy their share. Each owner also agrees not to sell their interests without first offering it to the remaining owners at an agreed-upon price or formula.

Consider the following options for your business:
Partnership Life Insurance:
Farmers Partnership Life Insurance is designed to help your business survive the loss of a partner. To preserve the business, many partnerships have a buy-sell agreement, which fixes both the price and terms of the sale in the event a surviving partner buys out a deceased partner's interest. Life insurance can provide the necessary funds no matter when the partner's death occurs.

Sole Proprietorship Life Insurance:
You may want to transfer your business to a successor, in which case life insurance purchased by your heirs can provide funds to pay estate taxes and help sustain the business during the initial period of new management. Or, if your employees are interested in carrying on your business, a buy-sell agreement can be funded with life insurance to assure that your family will receive the optimum value for the business.

Stockholder Life Insurance:
We recommend that you use life insurance to create a pre-death buy-sell agreement certifying that if a stockholder should die, the remaining stockholders can purchase his/her shares at a fixed price. This will guarantee that heirs will receive cash for their inherited business interest and that surviving stockholders will maintain control of the business.

If you would like to find out more about the above options as well as other options such as Key Person Insurance, please contact me at 480-598-1110.

Greg J. Geryak– Farmers Insurance Group.

Posted on March 19, 2004