Life Insurance for DFW Business Owners: Family and Business on One Page

If you own a business, you've got two families. The one at home and the one on payroll.

Most owners I meet in Dallas-Fort Worth have one life insurance policy. They bought it years ago, when the business was a truck and a phone number. The business grew. The policy didn't.

Ask them what it's supposed to cover and it gets quiet. The house? The loan you personally guaranteed? Your partner's buyout? Payroll while somebody figures out how to run the place without you?

One policy can't do all of that. And when one policy is trying to do five jobs, it usually does none of them well.

I'm Harvey Baker Jr., a licensed Texas agent in McKinney. I work with North Texas owners who run shops, practices, and crews of about 5 to 50 people. Here's how I'd put your family and your business on one page.

Start with the jobs, not the policy

Don't start with "how much life insurance should I buy?" Start with "what has to get paid if I'm gone?"

For most owners, the list looks something like this:

1. Your family's life. The house, the bills, the kids, your spouse's income for the years you would have worked.

2. Business debt with your name on it. Loans, lines of credit, equipment notes, and leases you personally guaranteed.

3. Your ownership. Who buys your shares, at what price, and with what money.

4. Keeping the doors open. Cash to cover payroll, recruit a replacement, and calm customers and lenders while the business finds its feet.

5. What you want to leave behind. A paid-off home, money for grandkids, a business that's still worth something.

Write each one down with a rough number next to it. Your CPA can help with the business numbers. That page is your plan. The policies just fund it.

Which coverage usually fits which job

This is general, not advice for your situation. But it's how the pieces usually line up:

• Family: Personal life insurance you own, with your spouse or a trust as beneficiary. Term often fits the years the kids are home and the mortgage is big. Permanent coverage may fit if you want something that lasts for life.

• Guaranteed debt: Often term coverage sized to the debt and the years it runs. More here: Signed a Personal Guarantee? Your Family Co-Signed Too.

• Ownership: Coverage that funds the buy-sell agreement, so your family gets paid and your partners get the business. More here: How to Fund a Buy-Sell Agreement With Life Insurance.

• Keeping the doors open: Key person coverage, usually owned by the business and payable to the business. More here: Key Person Insurance for Texas Small Businesses.

• What you leave behind: Often permanent coverage, coordinated with your estate plan and your attorney.

Notice what's missing: the group life you might get through your own company's benefits plan. It can help, but it's usually a small amount and tied to the job. More here: Group Life Insurance for Small Businesses: Is It Enough?

Who should own each policy

This part trips people up, and it matters. Who owns the policy, who pays for it, and who gets the money changes how it works, and it can change the tax picture.

• Family coverage is usually owned by you, your spouse, or a trust.

• Key person coverage is usually owned by the business.

• Buy-sell coverage depends on how the agreement is set up. Partners may own policies on each other, or the business may own them.

Don't guess on this one. Talk with your CPA or attorney before you set up ownership and beneficiaries, especially on anything the business pays for.

The "one big policy" trap

Here's what I see a lot. An owner buys one large personal policy and says, "My wife can use it for whatever."

Sounds simple. Here's the problem:

• The bank wants its guaranteed loan paid.

• Your partner wants to buy your shares, and the agreement says they're supposed to.

• Your crew needs payroll Friday.

• Your spouse needs to keep the house.

Now one check is getting pulled four ways, and your spouse is the one standing in the middle of it. That's not a plan. That's a fight with a deadline.

Separate jobs. Separate dollars. Clear beneficiaries.

Hypothetical example for illustration only: Picture a 47-year-old who owns half of a 20-person HVAC company in Denton County. He has one personal policy he bought when his oldest was born, a line of credit he personally guaranteed, and a buy-sell agreement with his partner that was never funded. If he died next year, that one policy would have to cover the house, the credit line, and whatever his partner could scrape together to buy his half. His wife would end up negotiating with the bank and his partner at the same time. Nobody did anything wrong. Nobody put it on one page.

Don't forget the living side

Death isn't the only risk. If you got hurt and couldn't work for six months, a life policy doesn't pay. Your business would still need you, and your family would still need income. More here: Disability Coverage for Owners: If You Can't Work, Who Runs It?

Questions to ask before you buy anything

• What jobs does my current coverage actually cover?

• Who owns each policy, and who's the beneficiary?

• Which business debts have my personal guarantee on them?

• Is my buy-sell agreement funded, and is the price still current?

• If I died tomorrow, who would run the business for the next 90 days?

• When did I last update my coverage, and has the business grown since then?

If you can't answer most of those, you're normal. You're also exposed.

Nothing in this article is tax, legal, or financial advice. Talk with your CPA or attorney about your situation. Coverage, eligibility, and rates vary by carrier and health. Cheap is a price. Right is a fit.

Get your Gap Map (free, 20 minutes)

If you want a clean starting point, I built a one-page Gap Map: where your home, your business, and your exit still depend on one person. Three columns. Plain English. You keep it either way, whether you buy anything or not.

Call or text 430-373-7752 with the word MAP for a free one-page Gap Map. Or learn more at bakerlegacypartners.com.

Built by you. Protected without you.

Insurance products involve costs, limitations, exclusions, and suitability considerations. This article is educational and is not tax, legal, securities, or financial advice.

Harvey Baker Jr., Licensed Texas Life, Accident & Health Agent, TX License #3470534. Coverage, eligibility, and rates vary by carrier and health.