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Minding Your Business Life Insurance Can Provide the Protection You Need

You work hard so your business can thrive. You and others depend on it—including your family and employees. You’re aware that, in an instant, your livelihood—your business—could go up in smoke, or could just die a slow death.

You’ve protected your business with property and liability insurance. But have you insured your business’s future?

Life insurance can help.

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Getting (and Keeping) Top Talent

It’s a competitive world; hiring good talent, and keeping it, can be challenging; life insurance can help.

Competitive advantage.

Your business provides you and your employees that you select with extra income (a bonus) to be used to buy permanent life insurance. This is called an executive bonus arrangement. As a bonus, it is considered income to your employees, but income tax-deductible to your business, under IRC §162. And your employees may like that they get needed death benefit protection, plus potential access to money through a policy’s cash value.1

The arrangement can include “golden handcuffs.” This means that your employee must meet certain obligations, like staying with the company for a specified time, in order to benefit from the life insurance policy’s accumulated cash value. Note that “golden handcuffs” may impact the business’s tax advantages.

Share the costs, share the benefits.

Your business and an employee split the cost of a permanent life insurance policy, along with the cash value1 and death benefit. This is known as a split dollar arrangement. It’s a relatively low-cost way to provide an extra, attractive benefit to an employee. It’s also a cheaper way for an employee to get needed life insurance coverage and potential access to cash value.

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Insulating Your Company—Even from Death

You can identify the employees that your business simply can’t do without in a heartbeat; if one should die unexpectedly, it could cripple a big portion of your business’s income.

With a life insurance policy on the life of a key person in place, and in the event of the death of that key employee, the policy will pay your business a death benefit. The proceeds could be used to help pay off debt, offset lost sales, or cover the expenses that come with recruiting, hiring, and training a new employee.

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Controlling What (and Who) Happens to Your Business

You want to have a say over whom you’re in business with.

Picture this: Your business partner suddenly dies. You now find yourself in business with her husband. He knows nothing about the business. In fact, he wants to implement new ideas that you know will be disastrous. He offers to sell you his share in the business, but you don’t have enough liquidity to buy it.

A situation like this can be avoided with a buy-sell arrangement funded with business owner life insurance. This strategy obligates the deceased business owner’s heirs to sell their share in the business, based upon a predetermined formula, to the company or the remaining members of the business. This creates a ready market for your business and keeps the remaining owners in control.

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There are many challenges that you face as a business owner. Attracting and keeping top talent and being prepared to successfully address critical events, including the loss of a key employee or partner, are top concerns. Life insurance offers you several affordable solutions; explore the different types of policies that can help.

Then work with a financial professional to uncover these and other ways that life insurance can help you to protect your business and your future.

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Footnote

1 Accumulated cash value is accessed via policy loans and withdrawals. Outstanding loans and withdrawals will reduce policy cash values and the death benefit and may have tax consequences.

Our policies contain exclusions, limitations, reductions in benefits and terms for keeping them in force. A financial professional can provide you with costs and complete details.

 

Prudential Financial and its financial professionals do not give legal or tax advice. Please consult your own advisors.

FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE PUBLIC.
© 2016 Prudential Financial, Inc. and its related entities.

For Compliance Use Only: 0298191-00001-00

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