Key person and business owner life insurance in Texas
If the business depends on one or two people, this is how it survives losing one of them.
What it covers
- Key person coverage: the business owns a policy on an owner or essential employee and receives the benefit
- Buy-sell funding: gives surviving owners the cash to buy a deceased partner's share from their family
- Loan protection: coverage assigned to a lender that requires it, or sized to pay off business debt
- Money to recruit and train a replacement and cover lost revenue while the business regroups
- Executive benefits: employer-paid life coverage used to keep key employees (optional)
How it works
Most small businesses in Texas run on one or two people. If one of them dies, the revenue they brought in stops, the loans they signed for don’t, and the family may suddenly own a share of a company they can’t run. Business life insurance puts money in the right hands at that moment.
Key person coverage is the simplest form. The business owns a policy on the person it can’t afford to lose and receives the benefit. That cash pays the bills while the company recruits a replacement, or gives the owners room to wind down in an orderly way.
Buy-sell funding is for businesses with more than one owner. A buy-sell agreement, drafted by your attorney, sets what happens to an owner’s share at death. Life insurance on each owner funds the purchase, so the surviving owners keep control and the family gets paid.
Loan protection is often required rather than chosen. Lenders that hold a loan you signed for personally frequently want a life policy assigned to them for the loan balance.
What changes your price
- The age, health, and tobacco use of the person being insured
- How much coverage: the loan balance, the buyout price, or the cost to replace the person
- Term length, or permanent coverage for an open-ended need
- How the policy is structured, which affects who owns it and who is paid
- Which carrier, since each one underwrites health differently
What we’ll ask you
- Who the business can’t operate without, and their age and general health
- Whether you have partners and a buy-sell agreement in place
- Any business loans you signed for personally, or that come with a lender requirement
- Roughly what it would cost to replace the person and ride out the disruption
- How the business is organized (LLC, corporation, partnership)
We’ll quote from there. Quotes are free and there’s no obligation to buy.
Why go through an independent agent
Business life cases are usually larger than a personal policy, and carriers compete hard for them, but they also underwrite the insured person closely. A carrier that’s strict on one health condition may be lenient on another. We quote several carriers at once, so a single company’s view of one owner’s medical history doesn’t set the price for the whole business.
We also handle the rest of the company’s coverage, so the life policy fits alongside your liability, property, and auto instead of being sold in isolation.
Common questions
What is key person insurance?
A life policy the business buys on an owner or employee whose loss would hurt the company: the founder, the top salesperson, the only licensed engineer. The business pays the premium, owns the policy, and is the beneficiary. The money is meant to keep the doors open, pay debts, and buy time to find a replacement.
How does buy-sell funding work?
If you have partners, a buy-sell agreement says what happens to an owner's share if they die. Life insurance is the usual way to fund it: each owner is insured, and the benefit gives the survivors cash to buy the share from the family at the agreed price. The agreement itself comes from your attorney. We handle the policies that pay for it.
Term or permanent for a business?
Often term, sized to the loan or to the years until a planned exit. Permanent coverage comes up when the need is open-ended, such as a buy-sell with no end date, or when the policy doubles as an executive benefit. Ask your accountant how premiums and benefits are treated for tax purposes, since it depends on how the policy is set up.
Does my lender require it?
Many bank and SBA loans require life insurance on the owner, assigned to the lender, as a condition of funding. It's usually a term policy sized to the loan balance, and it's often the first life policy a business buys.
This page is general information about key person life insurance in Texas, not a description of any specific policy. What a policy covers, excludes, and pays is set by the policy documents the carrier issues, which control if anything here differs. Coverage availability and terms vary by carrier and by risk, and can change after this page was written. How we write and check these pages.
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