Let’s get one thing out of the way: when most people hear “life insurance,” their minds immediately go to funeral expenses and sad piano music.
But if you’re a business owner, life insurance is so much more than that. It’s not just a safety net for your family, it’s a Swiss Army knife for your business. And whether you’re running a fifth-generation family shop or building something big and bold from scratch, this tool can play a key role in keeping the business, and your legacy, intact.
Here’s a high-level look at how life insurance can be one of the smartest moves you make as a business owner.
You’ve got a partner. Or maybe multiple partners. You’ve built something valuable together. But what happens if one of you is suddenly not in the picture?
Cue: the buy-sell agreement. This legal document says, “Here’s what happens to your share if you die, become disabled, or want out.” But here’s the kicker—if there’s no funding behind it, it’s basically a fancy piece of paper.
In a cross-purchase plan, each owner buys a life insurance policy on the other owners. If one partner passes away, the surviving partners receive the death benefit proceeds personally—and use that money to buy the deceased partner’s share directly from their estate.
That means:
It’s clean. It’s fast. It respects the wishes of the departed and the needs of the business.
Every business has that one person you’d clone if you could. The rainmaker. The operations wizard. The founder with the magic Rolodex.
Now imagine they’re gone tomorrow.
Key person insurance can provide financial support to help your company navigate the loss of a crucial employee or owner. If a crucial player dies, the policy provides a lump sum to help you steady the ship, whether that’s covering lost revenue, hiring a replacement, or buying some breathing room to figure things out.
It’s business continuity with a backup plan.
Want to keep your best people from jumping ship for a competitor? Want to reward them without having to offer equity or massive cash bonuses?
Enter: executive benefits using life insurance.
You can design custom, non-qualified plans that give your top people future retirement income and life insurance protection. These plans can be flexible and tax-advantaged, but they should be carefully structured to comply with applicable IRS rules. They’re the “you stick with us, we’ll make it worth your while” kind of benefits.
And yes, we call them golden handcuffs, but the good kind. The kind that come with keys (and a solid vesting schedule).
Sometimes, your business just needs a little help from its friend… cash.
Whether you’re taking out a loan, working with an SBA lender, or exploring premium financing for a large policy, lenders often want to see life insurance as part of the equation.
And on the personal side, if your business is part of your estate, life insurance can create tax-free liquidity. That means no forced sales just to pay estate taxes or equalize distributions between kids who are in (and out of) the business.
It’s flexible capital when you need it most, without draining your operating cash.
Not all life insurance policies are created equal. Term, whole, indexed, variable—it’s alphabet soup unless you know what you’re looking at.
If you’re wondering what kind of policy makes sense for your business planning (or just want a primer so you don’t nod along blankly when someone says “IUL”), check out our no-jargon guide to the different types of life insurance. We break it down so you can figure out what’s actually useful for you and not just what some agent’s trying to sell.
If you’ve made it this far, congrats. You already know more about business planning with life insurance than most business owners ever will. But knowing is only half the battle.
Whether you’re looking to:
We’re here for that. At Transcend, we help business owners think through all the moving parts of your business and your personal financial life. Like a personal CFO—but without the suits or spreadsheets (unless you’re into that).
Let’s make a plan that’s built to last, even if life throws a curveball.
This communication is for informational purposes only and is not intended as investment, tax, or legal advice. Any strategies discussed should be evaluated in light of your own personal and business circumstances. Life insurance guarantees are subject to the claims-paying ability of the issuing insurance company. Please consult with your legal, tax, or financial advisor before taking action.
Blair blends the talents of the team through a disciplined and sophisticated individualized planning framework. He is a CFP® (CERTIFIED FINANCIAL PLANNER™) professional and specializes in asset allocation, estate distribution, insurance, and income modeling and solutions.
Phil has spent a career focusing on wealth transfer, charitable desires, and estate planning needs of numerous families throughout the Midwest. As a former pastor, Phil is uniquely experienced in walking alongside people through he peaks and valleys of life. Phil assist clients in getting connected to the people and resources that enrich their lives.
Russ layers over 24 years of tax expertise on top of a financial advisory career that began in 2005. Russ’s deep practical application of the tax code applies a wide lens across a lifetime of taxation to help clients drive the short term decisions that result in long term impacts. Russ also charts the course of our investment portfolios leveraging internal and external teams of CFPs®, CFAs, traders, and Portfolio Managers.