Sole Proprietor Life And Health Insurance
Coverage for the owner of a business. When a proprietor dies, debts of the business become the debts of the estate since in this circumstance the law recognizes business and personal assets as one. The executor is required to dispose of the business as quickly as possible. Life insurance can fund the disposition in several ways:
- If the business is transferred through a will, the life insurance's death benefit can be applied to the deceased proprietor's personal and business debts and estate taxes.
- If the executor conducts a forced sale or liquidation, a death benefit can be used to reduce or eliminate any debts. The death benefit can also be used as a source of working capital for interim financing to operate the business in the short run.
- If the business is to be transferred to a child or employee, the death benefit can provide funds to effect the transfer.
- If the business is to be sold to a key employee (s) through a buy-and-sell agreement, the key employee (s) usually has previously bought a life insurance policy on the sole proprietor and made all premium payments. The buy-and-sell agreement stipulates the formula to be used in valuing the business as well as other conditions of the sale. Upon the death of the proprietor and the sale of the business to the key employee (s), the proprietor's estate receives the cash amount according to the buy-and-sell agreement, and the key employee (s) receives the deceased proprietor's business.
Popular Insurance Terms
Case where an insurance company is placed by the state court under the control of the state insurance department. Claims are paid in the order filed until the insurance company's ability to ...
Program of health care designed for the prevention and/or reduction of illnesses by providing such services as regular physical examinations. This care is in opposition to curative care, ...
Same as term Bankers Blanket Bond: coverage for a bank in the event of loss due to dishonest acts of its employees or individuals external to the bank. For example, if a teller goes to ...
Time at which life insurance death proceeds or endowments are paid, either at the death of an insured or at the end of the endowment period. ...
Frequency of illness, sickness, and diseases contracted. ...
Early payout of anticipated death benefits from a rider attached to an existing policy or from a separate policy. The purpose is to allow the terminally ill insured an additional source of ...
Life insurance policy clause. If at the end of the grace period the premium due has not been paid, a policy loan will automatically be made from the policy's cash value to pay the premium. ...
Percentage of income required by a retiree to maintain a desired standard of living during the retirement years. ...
Maximum amount that an insurance company will pay under a liability insurance policy for claims resulting from a particular accident. This maximum amount applies regardless of the amount of ...
Have a question or comment?
We're here to help.