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
Same as term Close Corporation Plan: prior arrangement for surviving stockholders to purchase shares of a deceased stockholder according to a predetermined formula for setting the value of ...
Coverage provided for the insured's personal property in the event the insured incurs a loss resulting from theft, burglary, robbery, or malicious mischief, regardless of whether the loss ...
Coverage for property that moves from location to location from the perils of fire, lightning, explosion, windstorm, earthquake, collapse of bridges, flood, collision under one of the ...
To accumulate. For example, under one of the dividend options of a participating life insurance policy, dividends can accumulate at interest by leaving them with the insurance company; cash ...
Maximum amount of a specified type of insurance coverage, according to underwriting guidelines, that an insurance company feels it can safely underwrite on a particular exposure without ...
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Written contract between an insured and an insurance company stating the obligations and responsibilities of each party. ...
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Variation of ordinary life insurance under which current mortality experience and investment earnings are credited to the insurance policy either through the cash value account and/or the ...
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