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Who Should be Insured in a Family-Owned Business

Because life is uncertain, insuring more than just the senior members of a family-owned business could be the key to its survival.

Family Businesses

People discussing at a table

In many family businesses, the next generation is typically preparing to fill the shoes of the current generation. In some instances, the transition from one generation to the next has already been completed, and retired family members are receiving financial distributions from the business.

Then, suddenly the world changes when the son or daughter running the business becomes disabled or dies. Their spouse, if present, may have no interest in taking a role in the business, and may demand their share of the company in cash.

Disability and Life Insurance

Having sufficient disability and life insurance in place provides options. For example, the financial obligation to the older generation can be fulfilled to the extent of the coverage purchased. The surviving spouse’s share of the company could be paid in full. If necessary, the family could explore selling the business without the time pressure of having to do so at a below-market price.

In many family businesses, the economic welfare of multiple family members is tied to the continued function of the business. The loss of a key family executive can have significant negative effects across generations of family members.

To determine which family members should be insured, and at what level, key questions must be answered:

  • How could one offset the debt, revenue, and the loss of business contacts that may result from the loss of a particular individual?
  • How can long-term sales relationships be maintained?
  • Can a new person be recruited to replace the skills of a key family member?
  • If there is an operating agreement, what must be done to satisfy its terms?

A knowledgeable Risk Management professional can provide a family-held business with coverage options to keep the company viable even if the worst happens. Based on experiences with other family-held companies, solutions can be tailored to almost every business need.

Find the right Insurance to protect your family-owned business.

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Notices & Disclosures
F.N.B. Corporation and its subsidiaries (FNB) do not provide investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided by FNB are for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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