Additional Protection for Key Executives
Executives typically have higher incomes and often need larger death benefit protection than what is offered by typical employer-sponsored group benefit programs. By offering your key employees additional life insurance benefits, you can make available an increased level of protection that better suits their needs. In doing so, your organization can set itself apart when it comes to recruiting and retaining top talent.
Access to Cash Value A business owner who owns a whole life insurance policy can borrow against the accumulated cash value for a variety of purposes, including to help the business weather uncertain economic times, pay overhead expenses, or provide supplemental cash flow. Provide Executive Bonus A company can help key executives purchase additional life insurance through an executive bonus plan. The executive owns the life insurance policy and pays the premiums, and the company "bonuses" the executive an amount equal to the premium and tax liabilities. The executive can use the policy’s cash value to supplement their retirement funds or for other purposes. If they were to die during employment, the policy’s death benefits would be paid to the insured’s family typically income tax-free. Succession Planning A life insurance policy is often the cornerstone of a business’s succession plan. When a business uses life insurance as the funding vehicle of a buy-sell agreement, the death benefits are used to purchase a deceased partner’s share of the business from their estate. This can help reduce conflict between all parties involved and allow the business to keep running smoothly. When used to fund a one-way buy-sell agreement, the chosen successor can also use the policy’s accumulated cash value as a source of funding for purchase of the company at owner's retirement. Estate Equalization In many family-owned businesses, some family members are actively involved in the company, while others are not. Splitting a business equally among family members regardless of their involvement can put family members at odds potentially causing conflicts that interrupt the flow of business. In this scenario, you can use a life insurance policy as part of your estate plan to provide a death benefit to those family members who are not involved in the company. The death benefit can be equal to the value of the business you leave to the family members who are involved and who will likely take over company ownership. Key Employee Retention You can use a life insurance policy to help fund a deferred compensation program to provide additional retirement benefits to a key employee. In this arrangement, the company owns the policy on the executive and, when the employee retires, the company uses the policy’s cash value to provide supplemental retirement income to the employee1. If the executive dies prior to retirement, the proceeds would be paid to the company. The company can then use the money to re-coup premiums paid and provide a death benefit to the executive’s family. Key Person Insurance Many companies would falter with the death of a key employee. Lost revenue is only just one adverse effect that may impact the business. You can use life insurance to protect the company against the risk of a key employee’s unexpected death. The policy can be structured to provide the company with a death benefit equal to expected revenue loss and administration costs needed to find a suitable replacement. We can see in this graph below that the average annual return of a business life plan with a growth cap and a growth floor compared to the annual return of the S&P 500. 
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