Annette Dowdle
SVP & employee benefits consultant
HUB
People take insurance for granted until it’s needed, and it’s then that it can change people’s lives for the better. For small businesses, having the right benefits and insurance for employees is important to not only protect and support their health, but also the health of future generations. Additionally, with great insurance in place, family businesses can attract and retain good talent. We at HUB create that package for them with a little bit of art as well as science, but it always comes back to the human element of it all — which is even more vital for family businesses.
The beauty of insurance is that there are so many mechanisms in which it can be used. One of the best things a family business can do to prepare for the next generation is invest in a key man policy. A key man policy is a form of a life insurance policy that names the business as the beneficiary once that valuable person passes away. The money can be invaluable when that leader or decision maker needs to be replaced and can be used for recruiting, training and salary needs.
Kristin Swanson Scott, VP of Operations, Swanson Insurance Agency
Will Smith
Advisor
EH&B
When helping a business transfer ownership from one generation to the next, it is important to work closely with an estate-planning attorney, CPA, and insurance advisor to clearly identify the company’s objectives, value and funding methods for transfer. Life insurance is commonly used in buy/sell agreements to provide the liquidity needed upon death to purchase interest from the owner’s family/successors. Disability and long-term care insurance also need to be considered and will help with business continuation should the owner have a disability or chronic condition. Succession planning also provides an opportunity for the business to evaluate the role of essential employees. Owners can utilize key man life and disability insurance to protect the business and incentivize employee retention.
Jose Suquet
President and CEO
Pan-American Life Insurance Group
According to the Family Business Institute, only 30% of family businesses survive to the next generation. This is primarily because the family never put a business succession plan in place. What happens if the founder dies unexpectedly? Does the business have the cash flow or a reserve that it can draw on to survive? What if the founder wants to retire? Does the next generation have the financial resources to purchase the business? Life insurance can be used to address both issues efficiently, cost-effectively, and potentially income tax-free. It is an effective financial tool that every family business should consider.
