Life Insurance for Business Owners [2024]
Life insurance for business owners costs about $57 a month. Business owners should consider getting a key person life insurance policy, which provides compensation if a critical owner or employee dies. Find the best life insurance companies for business owners and evaluate your coverage options.
Ready to compare quick life insurance quotes?
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Brad Larson
Licensed Insurance Agent
Brad Larson has been in the insurance industry for over 16 years. He specializes in helping clients navigate the claims process, with a particular emphasis on coverage analysis. He received his bachelor’s degree from the University of Utah in Political Science. He also holds an Associate in Claims (AIC) and Associate in General Insurance (AINS) designations, as well as a Utah Property and Casual...
Licensed Insurance Agent
UPDATED: Dec 15, 2024
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
UPDATED: Dec 15, 2024
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- Life insurance for business owners protects dependents and business partners by ensuring the business continues to operate after your death
- Business owner life insurance quotes average $57 per month
- The best life insurance companies for business owners are State Farm and Pacific Life
If you’re a business owner, traditional life insurance may not provide enough coverage to meet your needs. Fortunately, there are many types of term life insurance for business owners, including buy-sell agreements and key person insurance.
This guide discusses business life insurance policies and compares rates to help you find the most affordable option.
Understanding Life Insurance for Business Owners
Having life insurance for business owners will ease any financial burden caused by your death, including supplementing lost income. It can also act as business overhead expense insurance by covering loans, leases, payroll, and employer-provided life insurance (or group life insurance) coverage.
Ideally, business owners will have both a personal and key person policy to protect their loved ones as well as their employees and business partners.
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Life Insurance Coverage Options for Business Owners
Business owners have plenty of options when it comes to buying life insurance. Compare different policies in the table below.
Business Owner Coverage Options
Type of Coverage Description
Term Life Insurance Affordable, flexible and provides protection during the critical years. You can purchase it for business partners as well
Permanent Life Insurance Provides lifetime coverage as long as you keep up with the premiums. Costs more but the guaranteed payout can be useful. Builds cash value.
You can choose a term plan, which lasts for a set number of years, or whole life insurance, which lasts the entirety of your life. Most life insurance for business owners is term life.
Term Life vs. Whole Life: Average Monthly Premiums for $100,000 Policies by Age
Age Term Life Policy Whole Life Policy
25 $11 $89
30 $11 $103
35 $11 $121
40 $12 $143
45 $14 $173
50 $18 $213
55 $23 $269
60 $32 $355
65 $44 $475
Learn more in our term vs. permanent life insurance guide.
Personal Life Insurance for Business Owners
Personal life insurance provides a death benefit to your family or business partners that they can use for business-related or funeral costs. Learn how life insurance works.
However, suppose your family needs the death benefit to replace lost income after your passing. In that case, a separate key man life insurance policy or buy-sell agreement is a more viable life insurance plan for business owners.
Key Man Life Insurance for Business Owners
What is Key man insurance? Key man protects a business from bankruptcy should an essential employee die or become unable to work. The business can buy key person life insurance on you, co-owners, CEOs, and other essential employees.
Since this is a company-owned policy, the business is responsible for making premium payments, not the employee covered by the policy.
Buy-Sell Agreement Life Insurance for Business Owners
A buy-sell agreement is ideal for business succession planning if you share ownership with someone else. It will determine what happens to business shares if one owner dies or decides to leave the business.
Typically, buy-sell agreements do not include life insurance, but you can add coverage in the following ways:
- Cross-purchase agreements: Business owners buy life insurance on one another and use the death benefits to purchase shares if one should die.
- Entity purchase plan: The business buys life insurance for each business owner and uses the death benefits to purchase shares if one should die.
Learn how to buy life insurance for someone else to see which plan works best for you.
Cost of Life Insurance for Business Owners
Finding cheap life insurance for business owners depends on age and medical history. Monthly rates start as low as $11 for 25 year olds, while older policyholders pay as much as $178.
Term Life Insurance Monthly Rates by Age Coverage Amounts
Age Monthly Rates for $100,000 Policy Monthly Rates for $250,000 Policy Monthly Rates for $500,000 Policy
25 Years Old $11 $13 $21
30 Years Old $11 $14 $22
35 Years Old $11 $14 $22
40 Years Old $12 $17 $26
45 Years Old $14 $21 $34
50 Years Old $18 $29 $50
55 Years Old $23 $39 $70
60 Years Old $32 $61 $87
65 Years Old $44 $92 $178
Since business owners typically require more coverage in the event of their death, your monthly rates may be higher than average. Keep reading to determine how much life insurance you need.
How to Determine the Amount of Life Insurance Business Owners Need
How much life insurance business owners need depends on the size of the business, any loans or debts, and your personal financial situation. Think about your beneficiaries and who would be financially impacted most by your death.
Use a life insurance calculator to calculate your term life insurance needs and determine how much term life insurance you can buy or if you need whole life.
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Best Life Insurance Companies for Business Owners
Most popular life insurance companies sell key person and other policies for business owners, including:
- Haven Life
- Lincoln Financial
- Mutual of Omaha
- Pacific Life
- State Farm
Our research finds that State Farm and Pacific Life are among the best life insurance companies for customer satisfaction and price.
Tips on Finding Life Insurance for Business Owners
Follow these tips when shopping for life insurance to guarantee you get the right policy:
- Determine how much coverage you need. Consider the amount of debt and overhead costs your business has and family members who are dependent on your income.
- Speak with a financial advisor. They can help you understand the tax implications of life insurance for business owners, including when life insurance is taxable and if you qualify for deductions.
- Compare life insurance quotes. Getting term life insurance quotes online is the easiest way to compare multiple companies at once.
Use our comparison tool above to start comparing free life insurance quotes today.
Why Life Insurance for Business Owners Is Critical
Business owners should have life insurance to cover business and burial expenses after their death. Term life insurance for business owners is the most popular, but many business partners opt for buy-sell agreements to protect their interests should one partner die or decide to leave the business.
Compare quotes online and speak with a financial advisor before you buy life insurance for business owners.
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Case Studies: Life Insurance for Business Owners
Case Study 1: John’s Key Person Insurance Policy
John is the owner of a successful manufacturing company. Recognizing the importance of protecting his business in the event of his untimely death, John decided to purchase a key person life insurance policy.
This policy would provide his business with financial compensation to cover the potential loss of his expertise and leadership. By securing a key person policy, John ensured that his business would be able to continue operating smoothly even without his presence.
Case Study 2: Sarah’s Buy-Sell Agreement Insurance
Sarah and her business partner co-own a marketing agency. They understand the need to plan for the unexpected, including the possibility of one of them passing away. To safeguard their business and ensure a smooth transition of ownership, Sarah and her partner established a buy-sell agreement.
As part of this agreement, they each obtained life insurance policies that would provide the necessary funds for the surviving partner to buy out the deceased partner’s share of the business. This arrangement guarantees continuity and stability for their agency in the face of unforeseen circumstances.
Case Study 3: Mark’s Personal and Key Person Policies
Mark is a sole proprietor of a small consulting firm. He recognizes the importance of protecting both his family and his business in the event of his death. To address these concerns, Mark decided to secure both a personal life insurance policy and a key person policy.
The personal policy would provide his family with financial support to cover personal and funeral expenses, while the key person policy would ensure that his business could continue operating and fulfill its financial obligations even without his direct involvement.
Frequently Asked Questions
Is life insurance for business owners expensive?
Life insurance rates for business owners are very affordable, starting at $11 monthly.
Why do business owners need life insurance?
Business owner life insurance will protect your family and dependents, including business partners, from losing their livelihood after your death.
Can key person life insurance be taxed?
Yes, key person life insurance rates must be paid with post-tax dollars.
What is a buy-sell agreement?
A buy-sell agreement decides how co-owners buy shares when another business owner dies or leaves the business.
How much key person life insurance coverage does a business need?
How much key man insurance you need depends on the covered employee’s compensation, any revenue the employee directly earns the business, and the cost of hiring and training their replacement.
What happens to life insurance for a business owner if the business gets sold or disbanded?
If the business is sold, the terms of the buy-sell agreement apply, or the new owner becomes the owner of the key person life insurance policy. However, if the business is disbanded or dissolved, you, as the business owner, can transfer the policy to a personal policy.
Can you cash out life insurance for a business owner?
You can only cash out life insurance for a business owner with a permanent policy. Term life insurance does not accrue cash value.
Can the key person for a key person life insurance policy be changed?
Yes, but the business entity that owns the policy must provide proper documentation to the insurer, and the insurance company can deny any changes.
Who files a business owner life insurance claim?
Beneficiaries must file a business owner life insurance claim to receive death benefits. Usually the surviving spouse, business partner, or successor files a business owner life insurance claim.
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Brad Larson
Licensed Insurance Agent
Brad Larson has been in the insurance industry for over 16 years. He specializes in helping clients navigate the claims process, with a particular emphasis on coverage analysis. He received his bachelor’s degree from the University of Utah in Political Science. He also holds an Associate in Claims (AIC) and Associate in General Insurance (AINS) designations, as well as a Utah Property and Casual...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
