BUSINESS LIFE INSURANCE PLANNING
Kelly Insurance Group places business life insurance across every application — key person coverage, buy-sell agreement funding, loan collateral, executive benefits, and succession planning — working with business owners and their advisors to ensure coverage structure serves the specific business objective.
SELECT A BUSINESS LIFE INSURANCE APPLICATION TO SEE HOW IT WORKS.
Key person life insurance covers the death of an individual whose loss would create significant financial disruption for the business. The company owns and pays premiums on the policy and receives the death benefit. Proceeds provide capital to cover revenue loss, fund a search for a replacement, stabilize operations, and reassure lenders and investors during the transition period.
DISCUSS THIS STRUCTURE WITH KELLY INSURANCE GROUPLife insurance is the most common and most efficient funding mechanism for buy-sell agreements between business owners. At the death of an owner, the death benefit provides the surviving owners — or the business — with the liquidity to purchase the deceased owner's interest from the estate at the agreed valuation, without requiring a distressed sale or outside financing.
DISCUSS THIS STRUCTURE WITH KELLY INSURANCE GROUPSBA loans, commercial real estate financing, and business acquisition loans frequently require life insurance on the principal borrower as collateral. A collateral assignment of life insurance gives the lender a claim on the death benefit up to the outstanding balance, satisfying the requirement while keeping ownership with the business or borrower.
DISCUSS THIS STRUCTURE WITH KELLY INSURANCE GROUPLife insurance structures — split-dollar arrangements, executive bonus plans, and COLI — are used to provide supplemental death benefits to key executives as part of a competitive compensation package. These arrangements can be designed to benefit the company, the executive, or both, depending on the structure selected.
DISCUSS THIS STRUCTURE WITH KELLY INSURANCE GROUPLife insurance provides the financial foundation for business succession — ensuring that the transition of ownership at an owner's death is funded, orderly, and does not force heirs to liquidate the business to pay estate obligations or buy out co-owners. A properly funded succession plan coordinates the life insurance program with the buy-sell agreement and the estate plan.
DISCUSS THIS STRUCTURE WITH KELLY INSURANCE GROUP
LIFE INSURANCE IS THE FINANCIAL FOUNDATION OF EVERY BUSINESS CONTINUITY PLAN
A business without life insurance on its key people, its owners, and its debt obligations is a business whose continuity depends entirely on everything going according to plan. Life insurance is the instrument that ensures the plan survives contact with the unexpected — providing capital at exactly the moment it is needed and cannot be generated any other way.
Kelly Insurance Group places business life insurance across every structure and application — key person, buy-sell funding, loan collateral, executive benefits, and succession planning — working with business owners, their attorneys, and their financial advisors to ensure the coverage, ownership, and beneficiary structure serves the specific business objective.
HOW LIFE INSURANCE PROTECTS A BUSINESS AT ITS MOST VULNERABLE MOMENTS.
THE DEATH OF A KEY PERSON IS A BUSINESS CRISIS WITHOUT INSURANCE
When a founder, top salesperson, technical expert, or C-suite executive dies, the business loses more than a person — it loses the relationships, expertise, and revenue generation that person represented. Key person life insurance converts that crisis into a manageable transition by providing capital to stabilize operations, fund a replacement search, and demonstrate financial continuity to lenders, investors, and clients.
A BUY-SELL AGREEMENT WITHOUT LIFE INSURANCE FUNDING IS AN UNFUNDED PROMISE
A buy-sell agreement establishes the legal right and obligation to purchase a deceased owner's interest. Life insurance provides the money to actually do it. Without funding, a surviving owner may not have the liquidity to buy out the estate, and the estate may be forced to sell to an outside party. Life insurance-funded buy-sell agreements are the standard for closely held businesses precisely because they work when they need to.
BUSINESS DEBT CREATES A LIFE INSURANCE REQUIREMENT — LENDER OR NOT
SBA loans and commercial lenders typically require life insurance on the borrower as a condition of the loan. But the business case for coverage extends beyond the lender's requirement: business debt not covered by insurance becomes an estate obligation at the owner's death, potentially forcing heirs to liquidate business assets or sell ownership interests under time pressure.
EXPLORE MORE BUSINESS LIFE INSURANCE RESOURCES
FREQUENTLY ASKED QUESTIONS.
What is the difference between key person insurance and buy-sell insurance?
Key person insurance is owned by and payable to the business — it compensates the company for the financial loss caused by a key person's death. Buy-sell insurance funds the purchase of a deceased owner's business interest by the surviving owners or the business. Both are business life insurance structures, but they serve different purposes and involve different ownership, beneficiary, and premium arrangements.
Who should be covered by key person life insurance?
Any person whose death would create significant financial disruption for the business — founders, top revenue producers, technical experts with irreplaceable knowledge, or executives with critical lender and client relationships. The test is whether the business could continue operating normally without that person, and whether the death benefit would provide meaningful capital to manage the transition.
How is the key person insurance death benefit amount determined?
Common approaches include a multiple of the key person's compensation, an estimate of the revenue they generate or protect, the cost to recruit and train a replacement, or the potential loss of a specific contract or business relationship. There is no universal formula — the right amount depends on the specific business impact of that person's death.
What happens to key person insurance if the key person leaves the company?
The company can surrender the policy and receive the cash value, transfer ownership to the departing key person as part of a separation agreement, or allow the policy to lapse. The handling depends on the policy type, the accumulated cash value, and any agreements in place regarding the policy at the time of employment.
Does the business get a tax deduction for key person insurance premiums?
Generally no. Premiums paid on key person life insurance where the business is the beneficiary are not deductible as a business expense. The death benefit is generally received income-tax-free by the business. Alternative minimum tax considerations and COLI rules apply for larger programs — confirm the tax treatment with a qualified tax advisor.
Can life insurance fund a buy-sell agreement between more than two owners?
Yes. Multi-party buy-sell agreements can be funded using either a cross-purchase structure — each owner insures every other owner — or an entity redemption structure — the business owns policies on each owner. For businesses with more than three or four owners, entity redemption is typically simpler to administer. Each structure has different tax implications at the triggering event.
READY TO GET STARTED?
PROTECT YOUR BUSINESS FROM THE LIFE INSURANCE EXPOSURES MOST OWNERS OVERLOOK.
Kelly Insurance Group works with business owners and their advisors to identify and close business life insurance gaps — key person, buy-sell, loan collateral, executive benefits, and succession planning — with coverage structures that serve the specific business objective.
The availability of coverage and eligibility for coverage can depend on numerous factors. We cannot guarantee that all customers, individuals, and businesses looking for coverage will be successful in these efforts when contacting our team. All policy coverages and terms need to be fully reviewed by the respective consumer to ensure the coverage asked for is what is specifically being quoted or provided by any insurance policy. Insurance Policies, Coverage Changes, and their terms and conditions are not bound or altered until written confirmation is provided by one of our licensed team members or underwriters. This page does not offer legal advice, legal opinions, or policy interpretations. Rather, this page is meant as a resource to help provide customers and insurance consumers with additional considerations that may help in their insurance buying or pursuit of insurance information. Kelly Insurance Group does not employ or direct attorneys.
FIND RELATED COVERAGE FAST
LOADING LIVE SITEMAP...
Disclaimer: Coverage availability and eligibility may depend on many factors, including underwriting review, carrier guidelines, policy terms, state requirements, business operations, risk characteristics, and other information provided during the application or quoting process. Kelly Insurance Group cannot guarantee that every individual, customer, organization, or business seeking coverage will qualify for, receive, or successfully place insurance coverage. All policy coverages, exclusions, conditions, limits, endorsements, and terms should be carefully reviewed by the consumer, insured, or applicant to confirm that the coverage requested is the coverage being quoted, offered, or provided. Insurance coverage, policy changes, endorsements, cancellations, and other policy terms are not bound, changed, confirmed, or altered unless and until written confirmation is provided by a licensed Kelly Insurance Group team member, the applicable insurance carrier, or an authorized underwriter. This page is provided for general informational purposes only and does not provide legal advice, legal opinions, insurance coverage opinions, or policy interpretations. Information on this page should not be relied upon as a substitute for reviewing the actual policy language or consulting appropriate professional advisors. Kelly Insurance Group does not employ, supervise, or direct attorneys.