When we think of life insurance, we usually think of protecting our spouses or children. But if you own a business with partners, life insurance is critical to keeping that business alive. I recommend every business partnership have a “Buy and Sell Agreement” backed by life insurance.

Here is how it works:

If there are three partners, each partner takes out a life insurance policy on the other two. If one partner dies, the insurance payout goes to the surviving partners. They then use that cash to buy the deceased partner’s share of the business from their family.

Without this, the deceased partner’s share usually goes to their spouse. That spouse might not know how to run the business, or they might just want the cash value immediately. It creates a traumatic and financially difficult situation that often causes businesses to implode because the surviving partners don’t have the liquid cash to buy out the share.

We also look at “Key Man” policies. If you have a star employee whose death would financially wreck your operations, the business pays for a policy on their life.

If they pass away, the business gets an infusion of cash to find and train a replacement. It’s about ensuring your hard work survives the unexpected.