Whole Life Insurance: Is It an Overlooked Foundation of Business Succession Planning?

Whole Life Insurance: Is It an Overlooked Foundation of Business Succession
Planning?
MassMutual policyholders share lessons learned

SPRINGFIELD, Mass., Oct. 8 /PRNewswire/ -- When its owner for more than four
decades passed away suddenly, Troy Belting and Supply Co. in Watervliet, NY
could have collapsed, as do many family businesses that lose their leaders.
Instead, the company continued to operate and grow, thanks in part to a
succession plan funded by life insurance.

"We were able to keep operating the company and retain every one of our
workers because my father had the foresight to put a succession plan in place
that protected not only his family but also the livelihoods of all of our
employees," said Jason Smith, who succeeded his late father in 2003. "Whole
life insurance was a critical part of that plan."

And whole life insurance has become a part of the newest Troy Belting
succession plan, too. "Both Jason and his mother, Karen, have purchased
key-person whole life insurance policies and rely on the death benefits to
ensure that the company and its employees will have continuity, should
anything happen to either of them," said financial professional Todd McDonald
of The Albany Agency, a general agency of Massachusetts Mutual Life Insurance
Co. (MassMutual). "They want to take care of their family and their employees
in the same way that their father and husband did."

The company's story is a lesson in how whole life insurance can help business
owners manage some of the most challenging and common risks they face, such as
retaining control of a company upon the death of a partner, retaining and
rewarding top talent, keeping a company running effectively upon the death of
a key employee, and even finding cash at times when credit dries up.

"The versatility, guarantees, and permanence of whole life insurance can help
solve some of the inevitable challenges that businesses confront over time,"
said Beth Wood, assistant vice president, U.S. Insurance Group, MassMutual.
"Many business owners realize that they will be forced to deal with one or
more of these types of issues one day, which is why they want to have a plan
that's guaranteed to be there when they need it."

Whole life insurance can, for example:

-- Protect a business or business owner from financial loss - including
the
loss of control of a part of the business - as a result of the death
of
a partner or co-owner. As part of a buy-sell agreement, the policy's
death benefit can be used to purchase the deceased partner's shares
from
his or her estate.
-- Protect a business from loss as a result of the death of a key
employee.
The policy's death benefit can provide a cushion that enables the
company to continue operating while seeking a replacement.

-- Be used as a highly valued employee benefit for key personnel whose
loved ones can benefit from permanent, guaranteed coverage in the
event
of the employee's death. In addition, the employee may be able to draw
upon the policy's cash value through loans to help supplement income
in
retirement.*

Furthermore, the cash value of a whole life insurance policy can give
businesses the flexibility to manage through the ups and down of the business
life cycle by providing funds to respond to expected and unexpected challenges
and opportunities. Among many potential uses, a whole life insurance policy's
cash value can be used as, for example:

-- A source of cash during times when access to conventional sources of
credit are restricted or unavailable.
-- A source of emergency funds to pay for replacement or temporary talent
if a key employee leaves, becomes disabled or retires.

-- A "bookable" asset on the company's balance sheet.

"A whole life policy can help a business address more than one need at once,
and that's the kind of leverage any smart businessperson can appreciate," said
Timothy Flanagan, general agent, Hinrichs Flanagan Financial, a MassMutual
general agency in Charlotte, N.C. "Whole life insurance can be part of a very
effective strategy for managing what I think are the three biggest and most
common risks that business owners face: lack of capitalization and liquidity,
attraction and retention of good employees, and continuity and succession.
And it's not an 'all or none' decision - many smaller or younger businesses
may opt for quality, convertible term life insurance, so as they grow and
additional cash becomes available, they're able to bridge to broader
benefits."

The urgent need for business owners to manage both personal and business risks
was highlighted by MassMutual's 2009 family business partners study, which
found that only 39 percent of those surveyed had a legally documented
succession plan in place.

To view Jason Smith and his mother tell their story and for more information
on how whole life insurance can help business owners, visit
massmutual.com/customervoices/business.

About MassMutual
Founded in 1851, MassMutual is a leading mutual life insurance company that is
run for the benefit of its members and participating policyholders. The
company has a long history of financial strength and strong performance, and
although dividends are not guaranteed, MassMutual has paid dividends to
eligible participating policyholders every year since the 1860s. With whole
life insurance as its foundation, MassMutual provides products to help meet
the financial needs of clients, such as life insurance, disability income
insurance, long term care insurance, retirement/401(k) plan services, and
annuities. In addition, the company's strong and growing network of financial
professionals helps clients make good financial decisions for the long-term.

MassMutual Financial Group is a marketing name for Massachusetts Mutual Life
Insurance Company (MassMutual) and its affiliated companies and sales
representatives. MassMutual is headquartered in Springfield, Massachusetts and
its major affiliates include: Babson Capital Management LLC; Baring Asset
Management Limited; Cornerstone Real Estate Advisers LLC; The First Mercantile
Trust Company; MassMutual International LLC; MML Investors Services, Inc.,
member FINRA and SIPC; OppenheimerFunds, Inc.; and The MassMutual Trust
Company, FSB.

*Distributions under a policy (including cash dividends, withdrawals and
partial/full surrenders) are not subject to taxation up to the amount paid
into the policy (the cost basis). If the policy is a Modified Endowment
Contract, policy loans and/or distributions are taxable to the extent of gain
and are subject to a 10% tax penalty. Access to cash values through
borrowing, withdrawals or partial surrenders can reduce the policy's cash
value and death benefit, increase the chance the policy will lapse, and may
result in a tax liability if the policy terminates before the death of the
insured.

CONTACT:
Karen Lavariere-Sanchez
413.744.7660
klavarieresanchez@massmutual.com

SOURCE MassMutual

Karen Lavariere-Sanchez, +1-413-744-7660, klavarieresanchez@massmutual.com