Two documents decide whether a business survives the loss of the people who run it. One protects the company's operations; the other protects its ownership.
Key-person insurance: operational continuity
The business owns a policy on the person it cannot run without — a founder, a rainmaker, the only license-holder. If that person dies or becomes disabled, the payout buys time: covering payroll, reassuring lenders, and funding the search for a replacement. Lenders increasingly require it as a condition of credit.
Buy-sell funding: ownership continuity
A buy-sell agreement says who buys a departing owner's share and at what price. Without funding, the survivors face a grim menu: borrow, liquidate, or accept the deceased partner's family as a new co-owner. Life insurance on each owner — cross-purchase or entity-owned — delivers the exact purchase price at the exact moment the agreement triggers.
The audit worth doing this quarter
- Does a written buy-sell agreement exist, and does the valuation clause reflect today's business value?
- Is there insurance funding it, and does the coverage amount still match the valuation?
- Is anyone irreplaceable uninsured?
Growth quietly breaks these arrangements — a valuation from five years ago funds five-year-old obligations. An annual review alongside your attorney and CPA keeps the promise and the funding aligned.
