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
Confirmation by an insurance company of the acts of its agent, regardless of whether or not these acts were committed within the limit of authority granted the agent by the company. By so ...
Same as term Contingent Business Income Coverage Form: coverage for loss in the net earnings of a business if a supplier business, subcontractor, key customer, or manufacturer doing ...
Reduction of private pension benefits to avoid "duplication" of Social Security benefits, according to a formula. Many pension plans "offset," or reduce, monthly pension benefits by a ...
Clause added to an insurance policy providing waiver of premium (WP) if the premium payer dies or becomes disabled. For example, this option is available on insurance policies on a child's ...
Coverage for business firms operating abroad to insure them against loss due to political upheavals including war, revolution, confiscation, incontrovertibility of currency, and other such ...
Provision in a life insurance policy that death benefits will not be paid in the event an insured dies from war-related causes; or in lieu of a death benefit there is a return of premiums ...
method of determining the worth of property to be insured, or of property that has been lost or damaged; method of setting insurance company reserves to pay future claims ...
Element usually found in industrial life insurance policies under which the insurance company upon the death of the insured under certain conditions is allowed to choose the beneficiary if ...
Coverage for exposures that exhibit a possibility of financial loss. ...
Have a question or comment?
We're here to help.