Partnership Life And Health Insurance
Protection to maintain the value of a business in case of death or disability of a partner. Upon the death or long-term disability of a partner, insurance can provide for the transfer of a deceased or disabled partner's interest to the surviving partner according to a predetermined formula. Funding can be achieved through either of two plans:
- Cross Purchase Plan each partner buys insurance on the lives of the other partners. The beneficiaries are the surviving partners who use the proceeds to buy out the deceased's interest. This plan can become complicated when there are more than two partners. For example, if there are four partners, partner A will buy insurance on the lives of partners B, C, and D. The procedure would be repeated with partners B, C, and D. Total policies would be 12.
- Entity Plan because of the number of policies required, the entity plan is most often used for buy-and-sell agreements by larger partnerships. The partnership owns, is beneficiary of, and pays the premiums on the life insurance of each partner. When one of the partners dies, the partnership as a whole purchases the deceased partner's interest. Premiums are not tax deductible as a business expense. If whole life insurance is used, the cash values are listed as assets on the balance sheet of the partnership and are available as collateral for loans.
Popular Insurance Terms
Several insurance companies under common ownership and, often, common management. ...
Underwriting method used in classifying applicants for life insurance according to certain demographic factors and assigning weights to these factors. Factors include physical condition, ...
Coverage for specialists in various professional fields. Since basic liability policies do not protect against situations arising out of business or professional pursuits, professional ...
Extremely aggressive behavior by an insurance agent to convince a prospect to purchase the insurance product without due regard for the prospect's ability to pay the premiums and/or needs ...
Act that makes the liability cost for cleanup joint and several. Even if a party is only partially responsible for losses inflicted, that party may be liable for the payment of the total ...
Language in the insurance policy that can be considered unclear or subject to different interpretations. Under these circumstances, the courts have generally ruled in favor of insured ...
Provision that funds a tax-qualified plan. Trust funds are the oldest, and still the most common, method of funding pensions. All contributions made by employer and employees are deposited ...
Accounts in which assets are allocated across the spectrum of equity, debt, and money market instruments. They are the most popular equity investment in variable annuities and variable life ...
Policy in which an insurer agrees to pay property or liability losses in excess of a specific amount per occurrence. For example, this type of coverage typically is used by an employer that ...
Have a question or comment?
We're here to help.