Whether you run a one-person operation or have a small business with multiple employees, a life insurance policy can be a smart investment for business owners. Your business is a crucial part of your day-to-day life, as well as your long-term planning for your family. If you or an important team member passes away unexpectedly, it can seriously impact your business and the family members who rely on that business’s revenue. You may need to take a life insurance medical exam to get a policy, so the earlier you get life insurance, the more affordable it’s likely to be.1 Here, we explore the best life insurance policy options for business owners.
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Why should business owners consider life insurance?
Life insurance pays a death benefit to a policyholder’s designated beneficiaries if the policyholder passes away while the policy is active. This can be especially valuable for small business owners whose families depend on business income.
There are several ways a life insurance death benefit can support small businesses:
- Avoid liquidation: If an owner or important team member dies, the death benefit may be used to fund the business until operations stabilize, so you don’t have to liquidate valuable assets before they’re matured.
- Support growth: A death benefit can be put back into the company to invest in growth and innovation.
- Pay estate taxes and court fees: Transferring wealth to beneficiaries may incur taxes or probate costs, which a death benefit can help cover.
- Provide an inheritance: If you have personal assets tied up in the business, a death benefit could serve as an inheritance for family members.
- Transfer ownership: Certain types of coverage can ensure that ownership and shares are transferred to family and partners.
What types of life insurance can business owners get?
There are several types of life insurance, but here are two of the most common policy types:
- Term life insurance: This type of policy is active for a specific term, typically between 10 and 30 years. The death benefit is only paid if you die during this period.2
- Permanent life insurance: A permanent life insurance policy is active for your whole life, as long as you pay monthly premiums.2
There are also specific types of life insurance coverage that can benefit small business owners, including the following:
Individual life insurance
These life insurance policies have a single policyholder and are good options for small business owners with no employees who are the primary earner for their families. An individual death benefit may be used for both personal and business purposes, so it could provide for both your business and family after you pass.3
Key person life insurance
Key person life insurance is designed to protect businesses if an important employee or business owner dies. Key person policies can cover the expenses of recruiting and training a new employee or replacing the lost business income if an individual with unique skills or knowledge dies.3 These policies are valuable for small business owners who are skilled developers or have unique industry knowledge.
Buy-sell agreement
A buy-sell agreement is a policy that establishes the transition of ownership if a partner dies, retires, or becomes disabled. It provides a framework for co-owners, family members, or key employees to buy out a deceased owner’s business shares. This type of policy may be useful for partnerships or ownership groups, as business partners may take out life insurance policies on one another as part of a buy-sell agreement to get the funds necessary to buy out shares.3
Group life insurance
Group life insurance is a policy that employers may offer to employees, and it may be tax-deductible for businesses in some cases. Group plans are valuable for companies with many employees because they make benefits accessible to a wide range of people, regardless of any pre-existing conditions.3
How much is life insurance for small business owners?
Around 72% of Americans overestimate the cost of life insurance, according to Life Happens and LIMRA’s 2024 Insurance Barometer Study.4 But if you’re asking, “How much is life insurance?” the answer is that it may vary significantly based on your plan. The cost of an individual policy will be much less significant than a policy that covers employees and lays out the groundwork for succession plans. It’s always smart to shop around to find a policy that best suits your business and family needs.
The bottom line
Life insurance can help small business owners plan for succession, avoid business disruptions, and support family members after they pass. There are several types of policies that can support small business owners in different ways, so always take the time to consider your coverage needs and research options carefully to ensure you choose a policy that aligns with both your personal and business goals.
Sources:
1 NerdWallet– Do You Need Life Insurance? Here’s When to Get It. Updated November 5, 2024. https://www.nerdwallet.com/article/insurance/who-needs-life-insurance. Accessed July 30, 2025.
2 Investopedia – Life Insurance: What It Is, How It Works, and How to Buy a Policy. Updated May 8, 2025. https://www.investopedia.com/terms/l/lifeinsurance.asp. Accessed July 30, 2025.
3 NerdWallet – Do You Need Life Insurance for Your Small Business? Updated July 11, 2024. https://www.nerdwallet.com/article/insurance/life-insurance-small-business-owners. Accessed July 30, 2025.
4 LIMRA – U.S. Life Insurance Need Gap Grows in 2024. Updated April 15, 2024. https://www.limra.com/en/newsroom/news-releases/2024/u.s.-life-insurance-need-gap-grows-in-2024/. Accessed July 30, 2025.
Content within this article is provided for general informational purposes and is not provided as tax, legal, health, or financial advice for any person or for any specific situation. Employers, employees, and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.
Aflac coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, Aflac coverage is underwritten by American Family Life Assurance Company of New York.
Aflac life plans – A68000 series: Term Life Policies: In Arkansas, Idaho, Oklahoma, Oregon, Texas, Pennsylvania & Virginia, Policies: ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68200, A68300 & A68400. In New York, Policies NY68200, NY68300 and NY68400. Whole Life Policies: In Arkansas, Idaho, Oklahoma, Oregon, Texas, Pennsylvania & Virginia, Policies: ICC1368100. In Delaware, Policy A68100. In New York, Policy NYR68100. B60000 series: In Arkansas, Idaho, Oklahoma & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400. Not available in Delaware. Q60000 series/Whole: In Arkansas & Delaware, Policy Q60100M. In Idaho, Policy Q60100MID. In Oklahoma, Policy Q60100MOK. Not available in Virginia. Q60000 series/Term: In Delaware, Policies Q60200CM. In Arkansas, Idaho, Oklahoma, Policies ICC18Q60200C, ICC18Q60300C, ICC18Q60400C. Not available in Virginia.
Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY, VA or VT. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations, and exclusions.
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Aflac New York | 22 Corporate Woods Boulevard, Suite 2 | Albany, NY 12211
