There are 2 main reasons that a company may need to purchase life insurance. The first one is to protect itself from the loss of a key employee. If a company were to lose its CEO, CFO, CTO, its top Sales guy, or its head of R&D, it could suffer a significant financial loss or impact. A life insurance policy owned by and paid for by the company would pay a lump sum amount to the company if one of its shareholders or key executives passed away.
The second reason is to provide funding for a partnership or buy/sell agreement. In a partnership, if a partner dies, their shares go to their estate and the company needs to buy them back in order to maintain full control. If the company cannot afford to buy back the shares, then the partner is risk of having to be in business with their deceased partner’s spouse.
The second reason is to provide funding for a partnership or buy/sell agreement. In a partnership, if a partner dies, their shares go to their estate and the company needs to buy them back in order to maintain full control. If the company cannot afford to buy back the shares, then the partner is risk of having to be in business with their deceased partner’s spouse.
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