A business succession plan can help with the orderly transition of ownership and management of a business in the event of the retirement, death or disability of one of the owners. Without proper planning, these situations can lead to an interruption or forced sale of the business.
Business succession planning can ensure that the remaining owners have the funds necessary to buy the individual’s business interest.
So, what happens when the majority owner is 67 years old but planning on “staying around for a few more years?” Sound familiar? I see this quote request at least once a month. There are usually 3 options presented to this client.
- 5-Year Term. There are a few of these products out there.
- Annual Renewable Term. The premium starts lower and increases each year
- 10-Year Term. This is the most common of the scenarios. The idea here being to throw it away when you’re done.
Let’s price out the 3 scenarios for our 67-year-old business owner. He is a standard, non-smoker rate classification and needs $3M of insurance for “three or four years.”
| Year | 5-Year Term | Annual Renewal Term | 10-Year Term |
| 1 | $28,130.00 | $24,753.00 | $29,115.00 |
| 2 | $28,130.00 | $30,405.00 | $29,115.00 |
| 3 | $28,130.00 | $33,915.00 | $29,115.00 |
| 4 | $28,130.00 | $37,965.00 | $29,115.00 |
| Cumulative Premium | $112,520.00 | $127,038.00 | $116,460.00 |
Now let’s consider a different product scenario. Let’s mix and match some features from two different products; let’s take the premium flexibility of a universal life contract and mix it with term rate pricing. We would have a product where we could change the level funding amount to better align with the need for coverage.
Here is what that product would look like compared to the others
| Year | 5-Year Term | Annual Renewal Term | 10-Year Term | UL/Term |
| 1 | $28,130.00 | $24,753.00 | $29,115.00 | $24,100.00 |
| 2 | $28,130.00 | $30,405.00 | $29,115.00 | $24,100.00 |
| 3 | $28,130.00 | $33,915.00 | $29,115.00 | $24,100.00 |
| 4 | $28,130.00 | $37,965.00 | $29,115.00 | $24,100.00 |
| Cumulative Premium | $112,520.00 | $127,038.00 | $116,460.00 | $96,400.00 |
The UL/Term product design saves the client thousands of dollars.
This product solution can be a great fit for your business owner client that isn’t quite ready to retire yet.
And you can present a custom-tailored solution.
