Partnership Insurance Protects a Business's Surviving Partners From Having to Close or Sell the Business in the Event That One of the Partners Passes Away
Often partners in a business will not have a funded buy/ sell agreement so unfortunately, if one of the partners passes away, then that person's spouse will become the new business partner potentially to the detriment of the surviving partners. The surviving partners may not get along with the spouse as the spouse is probably not competant at filling the deceased's role.
Furthermore, suppliers and clients may get nervous because the partner who passed probably held a key role in the day to day operations of the business, and they are wondering if the business is still viable without them.
This is one example of where inexpensive Term Life Insurance may be the answer. For example if your business is worth 1 million dollars, and there are two partners, each will need $500,000 in life insurance on the other's life. This way, if one of the partners passes away, then the second partner has the money to pay out the spouse and purchase the entirety of the business, or to fund a new partner, pay off suppliers etc. In a two-person partnership, if both partners are under 35 years of age, the chance of one of them dying prior to reaching 65 is over 40%. If the funds are not there to pay off the estate of the deceased partner, the business may be shut down, or may have to be sold, and often to competitors at a discounted rate.