Whole Life Insurance: An Overlooked Foundation of Business Succession Planning?

Whole Life Insurance is often overlooked as the Foundation of Business Succession Planning. I would like to share with you some important information about Whole Life Insurance that is provided by Massachusetts Mutual Life Insurance Company (MassMutual).

Many business owners realize that they will be forced to deal with issues such as business succession at some point, which is why they want to have a plan that’s guaranteed to be there when they need it. The versatility, guarantees, and permanence of whole life insurance can help solve some of these inevitable challenges. Whole life insurance can, for example:

• Protect a business or business owner from financial loss – including the loss of control of a part of the business – as a result of the death of a partner or coowner. As part of a buy-sell agreement, the policy’s death benefit can be used to help purchase the deceased partner’s shares from his or her estate.

• Protect a business from loss as a result of the death of a key employee. The policy’s death benefit can provide a cushion that enables the company to continue operating while seeking a replacement.

• Be used as a highly valued employee benefit for key personnel whose loved ones can benefit from permanent, guaranteed coverage in the event of the employee’s death. In addition, the employee may be able to draw upon the policy’s cash value through loans to help supplement income in retirement.*

Financial flexibility

Another factor to consider is Financial Flexibility. As long as the policy is kept in force, the cash value of a whole life insurance policy can give businesses the flexibility to manage through the ups and downs of the business life cycle by providing funds to respond to expected and unexpected challenges and opportunities. A whole life insurance policy’s cash value can be used as:

• A source of cash when credit is tight for circumstantial or external reasons.
• A source of emergency funds to pay for replacement or temporary talent if a key employee leaves, becomes disabled or retires.
• A “bookable” asset on the company’s balance sheet.

Finally, it’s not an all-or-nothing decision. Many smaller or younger businesses may opt for quality, convertible term life insurance, so that as they grow and additional cash becomes available, they’re able to bridge to the broader benefits of whole life insurance.

Specific Mass Mutual Product Information

The whole life series (WL-2007 and WL-NC-2007) are level-premium, participating, permanent life insurance policies issued by Massachusetts Mutual Life Insurance Company, Springfield, MA 01111-0001.

* Distributions under the policy (including cash dividends and partial/full surrenders) are not subject to taxation up to the amount paid into the policy (cost basis). If the policy is a Modified Endowment Contract, policy loans and/or distributions are taxable to the extent of gain and are subject to a 10% tax penalty. While the policy allows for loans, you should know that there may be little to no cash value available for loans in the policy’s early years.

Access to cash values through borrowing or partial surrenders will reduce the policy’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.

For more information on how whole life insurance can help business owners, visit www.massmutual.com/customervoices/ business or contact me directly. My job is to help educate you and your clients so you can help them make good decisions about whole life insurance for their business succession planning needs. As always, your questions and feedback are very important to me. Please email me at Michael@SWANWealth.com or call me at: 631-262-9254, to discuss how we can be of help to you and your agency.

Michael Fliegelman, CLU, ChFC, RFC, AEP®,
Michael is a Mass Mutual brokerage director and the CEO and founder of SWAN (Strategic Wealth Advisors Network www.SWANWealth.com). Michael is a leading authority on estate and business succession planning and has extensive experience in analyzing life, disability and long-term care insurance policies. He has been a featured commentator on Fox News and in Newsday.

Your questions and feedback is very important to me. Please email me at Michael@SWANWealth.com

Print / PDF