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
Right to sell a given security at a stipulated price until a future expiration date. For example, assume the "None-Do-Well" company's stock has a market value of $20. Investor A sells ...
Provision in many property insurance policies that allows an insured to pick coverage for selected perils. The choices are explosion; explosion, riot and civil commotion; explosion, riot ...
Assumption of liability through contractual agreement by one party, thereby eliminating liability on the part of another party. An example is a railroad sidetrack agreement with a ...
In life insurance, the exchange of a series of installment payments, as the result of an installment settlement, for a lump sum distribution. ...
Principle of equity in property, casualty, and health insurance. When two or more policies apply to the loss, each policy pays its part of the loss, unless its terms provide otherwise. For ...
Coverage on an all risks basis for loss due to theft or mysterious disappearance of personal property; damage to premises and property within resulting from theft; and vandalism and ...
Insured's income prior to the disability minus the insured's income after the disability. ...
Legislation passed in California that establishes procedures applicable to any worker who incurs a job-related injury. This act has far-reaching implications for workers compensation ...
Individuals other than the crew of a ship who forcefully steal the ship and/or its cargo. This event is an insured peril under ocean marine insurance. ...
Have a question or comment?
We're here to help.