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
Same as term Close Corporation Plan: prior arrangement for surviving stockholders to purchase shares of a deceased stockholder according to a predetermined formula for setting the value of ...
Coverage provided for the insured's personal property in the event the insured incurs a loss resulting from theft, burglary, robbery, or malicious mischief, regardless of whether the loss ...
Coverage for property that moves from location to location from the perils of fire, lightning, explosion, windstorm, earthquake, collapse of bridges, flood, collision under one of the ...
To accumulate. For example, under one of the dividend options of a participating life insurance policy, dividends can accumulate at interest by leaving them with the insurance company; cash ...
Maximum amount of a specified type of insurance coverage, according to underwriting guidelines, that an insurance company feels it can safely underwrite on a particular exposure without ...
Rule of law under which a defendant who has two or more relationships with a plaintiff may be liable under any of these relationships. For example, an employer may be liable in two ways to ...
Written contract between an insured and an insurance company stating the obligations and responsibilities of each party. ...
Company in which shareholders limit their liability exposure to their percentage of ownership or equity interest in the company. Shareholders' personal assets are protected in the event of ...
Variation of ordinary life insurance under which current mortality experience and investment earnings are credited to the insurance policy either through the cash value account and/or the ...
Have a question or comment?
We're here to help.