Key Takeaways
- Business owners have 3x the coverage needs of employees—personal, key person, and buy-sell
- 70% of business owners have personal guarantees they haven't factored into insurance planning
- Business insurance cases average 4x higher premiums than personal—worth the complexity
Business Insurance Practice
Client Question: "I have life insurance personally—does my business need separate coverage?"
Business owners have 3x the coverage needs of employees: personal protection, key person insurance, and buy-sell funding. This is a high-value niche.
The Partnership Problem
Business partners without a succession plan
Setup
Two 50/50 business partners have built a successful company worth $2 million. They have no buy-sell agreement.
Client says:
“My partner and I have been in business together for 15 years. The company is worth about $2 million now. If one of us dies, what happens? His wife doesn't know anything about running a marketing agency. Would she become my partner?”
Practice Objectives
- 1Explain what happens without a buy-sell agreement
- 2Describe how life insurance funds a buy-sell
- 3Discuss cross-purchase vs. entity purchase options
- 4Recommend they get an attorney to draft the agreement
- 5Position yourself as part of their planning team
The Key Employee
A business owner concerned about losing a crucial employee
Setup
A tech company owner is worried about what would happen if their CTO died. The CTO is brilliant and the business depends heavily on their knowledge.
Client says:
“My CTO is irreplaceable. She knows our systems inside and out—it would take years to rebuild what she knows. If she got hit by a bus tomorrow, we'd be in serious trouble. Is there insurance for something like that?”
Practice Objectives
- 1Explain key person insurance
- 2Discuss how it works and what it covers
- 3Help them calculate an appropriate amount
- 4Explain the tax implications
- 5Also address if the CTO needs personal coverage
The SBA Loan Guarantee
A small business owner with personal loan guarantee
Setup
A restaurant owner personally guaranteed a $400,000 SBA loan. They haven't thought about how that affects their family.
Client says:
“When I opened the restaurant, the bank made me sign a personal guarantee for the loan. That's normal, right? Anyway, I want to get life insurance for my family. How much do I need?”
Practice Objectives
- 1Explore the personal guarantee situation
- 2Help them understand the risk to their family
- 3Include loan payoff in coverage calculation
- 4Discuss coverage specifically for the guarantee
- 5Ensure they understand the personal and business needs separately
The Succession Discussion
A business owner planning to retire
Setup
A 62-year-old business owner wants to sell their company to a key employee over time. They need to fund the transition.
Client says:
“I want to retire in three years and sell the company to my operations manager. She can't afford to buy it outright, so we're thinking of financing it over 10 years. But what if I die during that period? I want to make sure I get paid—or my wife does.”
Practice Objectives
- 1Understand the succession plan details
- 2Explain how life insurance can secure the buyout
- 3Discuss policy on both lives (seller and buyer)
- 4Consider the financing structure
- 5Recommend involving attorneys and accountants