Life Insurance for Business Planning

Two women discuss future business plans that include utilizing life insurance in unique ways.

You may be more familiar with buying life insurance for yourself or a family member as death benefit protection, but are you aware of the role it can play in business planning? Whether you’re an entrepreneur thinking about how to protect your share of the business or are looking for ways to reward your top performers, life insurance could be a solution.

Some common ways that life insurance is used in the corporate world are through buy-sell agreements, key-person insurance, executive bonus, and succession planning, just to name a few.

Not sure how to make sense of it all? Here are some common questions about using life insurance for business planning.

Can I Buy Life Insurance on My Business Partner?

Yes! It is very common for life insurance to be used in a business partnership. This process of buying life insurance on a business partner is typically used to fund a buy-sell agreement. In this type of situation, each partner buys a policy on one another. If one partner passes away, the life insurance policy’s death benefit can be used to buy the other person’s share of the business. In a case like this, the family of the deceased gets to turn their business interest into monetary value, and the remaining partner gets to keep working in the business they helped to create.

What Type of Life Insurance Can Be Used for a Buy-sell Agreement?

A buy-sell agreement can utilize several different types of life insurance—including term, universal life, or indexed universal life insurance (IUL). Talk to your financial professional1 to determine which type of life insurance is right for your situation.

Can Life Insurance Be Used in Succession Planning?

Yes, in cases where a family-owned business is being passed down a generation, but other children are not involved in the business, a life insurance policy can be used to help leave a fair inheritance to each family member.

Here’s a hypothetical example of using life insurance for succession planning. Imagine you have owned a wholesale business for 30 years and are wanting to leave it to your daughter to own and run. Your sons don’t want to be involved with the business, but you’d like your children to receive equal amounts as an inheritance. You don’t have much in assets besides the business and you would hate for your daughter to have to sell the business in order to provide her brothers with an equal share. A potential solution is purchasing a permanent life insurance policy on yourself, with a death benefit equal to a multiple of the company’s value, and make your sons the beneficiaries of the policy.

Upon your passing, each of them would get an equitable distribution of the inheritance; the boys would split the death benefit equally and your daughter would inherit and run the company business.

How Can I Use Life Insurance as an Employee Perk?

Many companies offer life insurance that provides a death benefit equal to or double the employee’s annual salary. But you can also reward top-performing employees with an executive bonus using life insurance. IUL insurance offers death benefit protection while also providing a bonus through the potential cash value generated during the lifetime of the policy. This can be a great addition to a compensation package for invaluable employees looking for out-of-the-box benefits to reward their good work.

Life insurance can do more than you’d expect in a business setting. Are you interested in seeing how you can incorporate life insurance into your business strategy? Talk to a financial professional1 or an agent near you to learn more.


Indexed universal life insurance products are not an investment in the “market” or in the applicable index and are subject to all policy fees and charges normally associated with most universal life insurance.

1 The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.

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