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
Effective proprietor of a business. Under the tax reform act of 1986, a uniform accrual rule prevents a qualified pension plan from being weighted in favor of the substantial owner of the ...
Arbitrator who settles disputes over the amount of loss when an insurer and an insured do not agree. ...
Will written totally in the handwriting of that individual whose name appears on the will. ...
Expectation of illness or injury. The probability of such occurrence is shown by a morbidity table, which is important in determining the premiums for health insurance policies. ...
Same as term Expense Allowance: payment to an insurance agent in addition to commissions. Expense allowances, that differ from company to company, vary with the amount of business agents ...
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 ...
Payment of an employee's employee benefit insurance plan benefits to the employee's individual retirement account ( IRA) or to another plan maintained by the employer. ...
Decision in the absence of a plaintiff or defendant at the specified court time. ...
Coverage for items that are on consignment, including exhibits, goods up for auction, and goods awaiting someone's approval. The stipulation for coverage is that these items cannot be under ...
Have a question or comment?
We're here to help.