If you are Co-Owner of a business then you should have a Buy/Selll Agreement in place
Buy/Sell Agreement is a legal document that states if you were to die then your partner would owe your family “X” amount of money to purchase your shares of the business
If your business is valued at $5 million and you each have 50% ownership then you both should have $2.5 million of Life Insurance on each other
If you die, the Life Insurance Death Benefit is paid to your partner as a Tax-Free $2.5 million payment
Your partner then uses that $2.5 million of Cash to buy your shares from your family
Companies buy these policies on Employees or Partners who’s skills are necessary to the business in order to maintain the same level of revenue
For Example: There is a Law Firm that only has 1 attorney who does Estate Planning. If that attorney dies then the Estate Planning division of their business completely stops until they replace that individual. This creates a Financial Loss.
The Life Insurance Death Benefit bridges the gap between the loss of the employee and hiring/getting a new person started (Replaces Lossed Income)
The Death Benefit also pays the cost to hire a replacement employee