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
One of four types of risks affecting the life insurance company as identified by the society of actuaries. This risk is associated with losses that the life insurance company may incur as ...
Method used to determine the policyholder's return on premiums paid into a life insurance policy. This method is illustrated in two ways:.Surrender of Policy Approach calculation of the ...
Liquid property that can be converted easily to cash. For example, a policyowner can borrow readily against the cash value of a life insurance policy. ...
Premium that equals the net level premium plus the modification of the net level premium to reflect the cost associated with paying for the first year initial acquisition expenses. The ...
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in property and casualty insurance, termination of a policy because of failure to pay a renewal premium. in life insurance, termination of a policy because of failure to pay a premium and ...
Agreement prepared by an insurance company and offered to prospective insureds on a take-it-or-leave-it basis. If the contracts are misinterpreted by insureds, courts have ruled in their ...
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