Owner Income Replacement
Owner income replacement life insurance helps protect the owner’s family if the income from the business suddenly disappears after death.
How this coverage works
The owner holds a personal policy, sized to what the household loses when the business stops producing income. The family is the beneficiary.
For most sole proprietors the business does not survive the owner. The distinction between business coverage and personal coverage collapses, and only the personal side matters.
Who this coverage may be good for
- Sole proprietors.
- Contractors.
- Small business owners whose household depends on business income.
What to consider before choosing it
- Personal and business coverage may both be needed and they do different jobs.
- A business-owned policy pays the business, not your family.
- Business income can be uneven. Size the coverage to the household, not to last year’s best month.
Common questions
Should the business pay for this?
Usually not, because you want the money going to your family rather than through the business. Ownership determines that, and ownership is a choice.
Is key person coverage enough?
No. Key person coverage pays the business. It does nothing for the people at home, and confusing the two is a common and expensive mistake.
How much do I need?
Enough to replace the household income for as long as the household needs it. That is usually a larger number than owners expect.
Coverage availability, benefits, riders, and underwriting requirements vary by carrier, product, state, and individual eligibility. This page is for general educational purposes and is not a guarantee of coverage.