Business Owner Term: runway insurance for the home stretch
By Trey Fairman, J.D., LL.M. June 19, 2015

Expert Interview: Long Term Care Insurance
November 10, 2020

With the challenging economic environment, many businesses are worth less than a few
years ago. Additionally, a shortage of loans in the capital markets makes credit more
difficult to come by and often with more strings attached. Finally, in an attempt to
receive greater valuations, many owners are waiting for the economy to recover before
exploring a sale.All of these factors paint a common theme. Owners have less time to manage the
details but have increased financial risk in the short run. Many business owners use
term insurance to cover this gap for the next ten years in a wait-and-see posture.
Term life insurance is a type of life insurance that provides coverage for a specified
period, typically ranging from 10 to 30 years. These policies help achieve numerous
business and personal financial planning objectives. Some of the most common are…
Monetizing a business for an owner’s family. Life insurance can provide a
predictable and fair valuation of privately owned firms. These funds may be paid
directly to the family in the untimely death of the practice owner if desired. It
provides a cash cushion for the family as they work through the business
succession and transition period.Funding a buy-sell agreement with a partner. Life insurance creates cash
liquidity at the time when a deceased partner dies. This allows the business or
the surviving partner to purchase a portion of the business from the surviving
spouse.Insuring key personnel. Life insurance creates cash liquidity for the lost revenue
attributable to the unexpected death of a key employee and provides funding for
hiring/training replacement personnel.Term insurance is simple to understand, guaranteed, inexpensive, and can provide
protection during crucial life stages. Coverage during these periods ensures those
relying on the business owner are financially secure.Simply put, these policies allow business owners to obtain the protection they require
allowing them to get back to work.