Life Insurance for New York Business Owners

Key person coverage

The company owns a policy on a person whose loss would reduce revenue or credit. The proceeds help it recruit a replacement, cover lost income and reassure lenders.

Buy-sell funding

Owners agree in writing who will buy a deceased owner's interest and how the price is set. Life insurance supplies the cash to complete the purchase.

Loan protection

Lenders may look for coverage on owners who guarantee business debt.

Succession and family

Cash that replaces the value of an owner's share for family members who are not in the business.

Cross-purchase

Each owner buys a policy on the others. When an owner dies, the survivors use the proceeds to buy that owner's share. It works well with a few owners, and the number of policies grows as owners are added.

Entity redemption

The company owns the policies and buys the deceased owner's interest itself. It is simpler to administer with several owners. Tax and valuation treatment differ between the two structures.

1. Review the arrangement

   We read any existing buy-sell agreement and look at how the business is owned and financed.

2. Size the coverage

   Coverage should reflect the value of the business or of the key person. We draw on a background in mergers and acquisitions and valuation, and your accountant confirms the figures.

3. Compare insurers

   We compare term and permanent designs across insurers for each person to be covered.

4. Coordinate with your attorney and accountant

   Your attorney drafts or updates the agreement and your accountant reviews tax treatment. We do not give legal or tax advice.

5. Review each year

   Coverage should keep pace with changes in value, ownership and debt.

At or before the application we explain our role and how we are paid, and you can ask for details of our compensation (Regulation 194). When we act as your broker, we represent you and not the insurer. Which structure is right depends on the type of entity, the number of owners and tax considerations that your attorney and accountant should review.

Who should own a key person policy?

Usually the company owns the policy, pays the premium and is the beneficiary, because the company is the one that would suffer the loss. Your attorney and accountant should confirm the setup.

Do I need a buy-sell agreement before buying insurance?

The agreement sets the terms and the insurance funds it, so the two work best together. Your attorney drafts the agreement, and we can begin comparing coverage while it is being prepared.

How much coverage does a buy-sell arrangement need?

It should relate to the value of the business or of each owner's share, which can change over time. We use the valuation your advisers rely on and revisit it regularly.

Are the premiums tax deductible?

In general, premiums are not deductible when the business is a beneficiary of the policy. Tax treatment depends on the facts, so confirm it with your accountant.

Is term or permanent insurance better for a business?

Term often fits obligations with an end date, such as a loan. Permanent insurance can fit arrangements with no end date, such as a buyout between partners. We compare both for your case.