Life insurance for business partners
[social_share]Life insurance is often purchased for those who are in a business partnership. This is because a partner in a firm is seen as someone crucial to the survival of that firm, either in the work performed or the business attracted. The other partners will want that risk to be covered.
Life insurance can be particularly important in smaller partnerships, where the death or incapacity of a partner could genuinely cripple the company, particularly in the short term. The life insurance is intended either to buy time for the partnership, in order to keep trading during a period of inevitable loss, or to allow for the surviving partners to wind up the firm.
A policy is usually purchased on the life of each partner. The beneficiary will be the surviving partners, or the partnership itself, if it has some sort of corporate entity, and this applies to small companies with a number of key stockholding executives. The partnership usually pays the premiums. It’s often possible to claim the life insurance premiums as deductions against profit for tax, although care may need to be taken in how the policy is set up so it can be demonstrated this is for a business purpose.
Larger partnerships don’t usually have life insurance for all their partners, only for their more senior partners. These partnerships aren’t as reliant on one partner as smaller firms are, and in the natural course of events a partnership of two hundred would expect one or two of them to die in any given year. There would be a set procedure for succession planning.
In some partnerships, there will be key man insurance in place for some of the partners and possibly some employees. This insurance is a fairly standard type of insurance arranged for employers.
As well as partners in a business, there are other partners who may want to purchase life insurance. These can include large companies dependent on a non-employee, or lenders that are lending on the basis of the borrower’s creditworthiness. In many of these cases, they will ask for life insurance paid for by the partnership as a condition for doing business.
