It is common business practice for a company to use corporate owned life insurance in several situations. This article will identify those situations and discuss appropriate amounts of coverage for each of them.
- SHAREHOLDERS’ AGREEMENTS – It is customary for a company with more than one shareholder to have in place an agreement between the shareholders which predetermines a course of action for specific situations. This agreement should include a Buy/Sell provision which deals with how a share interest will be purchased or redeemed in the event that a shareholder relinquishes or wishes to relinquish his or her shares in the company, including the death. The corporation will then insure each of the shareholders to the extent that the provision in the agreement dealing with death is all or partially funded. The same is true for those businesses operating as a partnership, as there should be a partnership agreement with provisions similar to the corporate agreement.