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The third area of interest to all parties in a family business succession plan is the issue of compensation and ownership. As already noted, a good buy-sell agreement can resolve questions of ownership. Funded with life insurance, it can even settle the matter of how the current owner is compensated for the business. But what about the employees (who may or may not be family members) who are the key to keeping the business running before, during and after the business transfer? How are they compensated, and how does the company protect itself against their loss?

Here, too, life insurance (and disability income insurance) plays an important role. Insurance on key employees can protect the business against loss resulting from their disability or premature demise, while ensuring the new owner(s) helps assure loyal employees that their employment (and, more importantly, their salary) is protected. A business overhead expense insurance policy on the owner, for example, can include employee salaries as a listed covered expense.

On a broader level, insurance and annuity products are the basis of the employee benefits that key employees expect in return for their continued loyalty and dedication.

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