Rest in Peace

What would the financial impact on your company be if you or one of your key employees died? Life insurance can soften the economic blow and provide the necessary cash to stay in business during the tran-sition, says Larry Singer, an insurance agent with New Jersey Life & Casualty Associates in Livingston.

If you've guaranteed a business loan, it's likely that the lender will call the loan on your death, leaving your successors without critical working capital. "A business owner has the obligation to protect the ongoing viability of the business," says Singer. Not only should you have enough life insurance to cover company debt, but you should also have coverage to replace lost income and fund the costs of replacing yourself and key staffers.

An important issue to consider when purchasing life insurance is the ownership of the policy and the beneficiary. If the business is the beneficiary, the proceeds could be subject to the general creditors of the company. If an individual, such as a spouse or partner, is the beneficiary, the survivors have more flexibility in their financial decisions.

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"[Ownership] and the designation of beneficiary are very important to avoid problems with creditors and to keep the proceeds from becoming taxable," Singer says. Before writing life insurance, your agent should review any loan and lease documents and be educated on the obligations of your business.

Jacquelyn Lynn is a freelance business writer in Orlando, Florida.