Ensures business continuity for the surviving business owners by providing unrestricted control of operations and future earnings potential. Advantages of using life insurance to fund a Buy-Sell Agreement. Death benefit provides the cash needed to fund the purchase agreement. Eliminates the need to build a cash reserve which may take many years and may be inadequate, resulting in the liquidation of surviving owners' assets. Death benefits are income tax-free under the current tax laws.
Total premiums paid are normally a fraction of the of the cash received as a death benefit.
Creates cash for the deceased's family to replace lost family income and pay estate settlement costs. Key Employee life insurance is any type of life insurance purchased by a business on the life of a key employee. A key employee is anyone whom the business deems to have a substantial impact on the financial success of the business and is not easily replaced, especially in a small business that lacks a pool of candidates. Reasons for protecting a business after a Key Employee's death. Death causes a loss of management skill and experience.