Life Insurance for Founders and business owners in the Philippines, Estate Liquidity, Buy-Sell Funding, and Business Continuity

Why founders and business owners buy life insurance?

If most of your wealth is tied up in your business, your family might not have enough cash if you pass away.
Life insurance can quickly provide cash when urgent decisions need to be made.

You don’t buy it just because you “need insurance.”

You buy it for cash, control, and to keep things running smoothly if something happens to you.

Table of Contents

TAP TO JUMP

1. Quick answer (TLDR)
2. The founder problem: wealth is illiquid
3. The five strategic reasons founders buy life insurance
4. Record-breaking policies, and how UHNW buyers think
5. The founder principles that reduce disputes
6. A simple 30-minute founder insurance check
7. What ongoing founder coverage should look like
8. The clean way to introduce this to partners and family

QUICK ANSWER (TLDR)

Founders get life insurance to make sure there’s cash, control, and stability if something happens.

Here’s how founders use life insurance and what it means in real situations:

It is used to:

1. Pay estate settlement costs and taxes without selling the business under pressure
2. Keep the company operating if a key person dies
3. Fund buy-sell agreements so partners can buy out shares cleanly
4. Protect the family balance sheet while ownership transitions
5. Add a conservative pool of accessible funds in some permanent plans

2. THE FOUNDER PROBLEM, WEALTH IS ILLIQUID

Founders typically have ‘paper wealth’ locked in shares, business real estate, receivables, inventory, and goodwill.

When someone passes away, families and partners need cash right away, not just a business valuation. Timing is often where estates run into trouble.

That’s why insurance is a key part of good planning for founders. It’s often faster than selling shares, refinancing property, or withdrawing money from the business.

Quick reality check

If your family needed cash in the next 30 to 90 days, where would it come from without putting your business at risk?

Let’s look at the five main reasons life insurance is important for founders. Each one helps with a specific goal.

3. THE 5 STRATEGIC REASONS FOUNDERS BUY LIFE INSURANCE

A. Estate liquidity, so heirs do not sell assets under pressure

Insurance payouts can provide quick cash for taxes, debt payments, legal fees, and estate settlements. This helps avoid having to sell shares or property in a hurry.

Most relevant if:
• You hold a lot of real estate
• Your heirs are minors
• The business has bank covenants and tight cash flow

B. Business continuity, key person coverage

If you pass away, your business could lose revenue, worry lenders, face delays, and have higher hiring costs.
Key person insurance can give your company cash to keep things steady while new leadership is found.

C. Funding buy-sell agreements

If there are partners, someone must own the shares after death.

A properly drafted buy-sell agreement answers:
• Who buys the shares
• At what price or valuation method
• Where the money comes from

Insurance is often the simplest way to fund this, since it doesn’t use up company cash or force partners to take out personal loans.

D. Equalizing inheritances

A common situation for founders is when one child runs the business, and others do not.

Insurance can help “equalize” so:
• The operating child keeps control of the business
• Non-operating heirs receive fair value without pressuring the company for dividends or asset sales

E. Conservative liquidity and asset positioning (in some permanent plans)

Some founders use permanent life insurance with cash value as a safe, accessible fund, if managed carefully.

This is not for everyone. It must be designed so premiums stay manageable even in weak business years.

Consider flexible premium structures that let you adjust payments based on your financial situation. Policy riders, such as premium waivers during financial hardship, can also help keep your coverage affordable and intact in tough times.

4. HOW UHNW BUYERS THINK ABOUT INSURANCE

Founders, especially ultra-high-net-worth individuals and business owners, frequently purchase significant life insurance policies.

These policies are often used as sophisticated tools for estate planning, tax efficiency, and business continuity, rather than just a simple death benefit.

Record-Breaking Policies

Most Valuable Policy: The current Guinness World Record for the most valuable life insurance policy is US$250 million, issued by HSBC Life in Hong Kong in February 2024 to a single, unnamed individual customer.

Previous Record: The prior record was a $201 million policy purchased in 2014 by a well-known, unnamed technology billionaire in Silicon Valley.

Reasons Founders Buy Large Policies

Founders and wealthy individuals use significant life insurance policies for a variety of strategic financial reasons:

Estate and Tax Planning: Life insurance proceeds are generally received by beneficiaries income-tax-free and can provide the necessary liquidity to cover estate or “death” taxes, preventing the forced sale of business assets or property.

Business Continuity (“Key Person” Insurance): Companies often purchase “key person” insurance for essential figures such as founders or top executives. If that person dies, the company receives the payout to cover costs such as hiring and training a replacement or offsetting lost revenue.

Funding Buy-Sell Agreements: Life insurance can provide the funds for surviving business partners to buy out a deceased partner’s shares, ensuring a smooth transition of ownership without financially straining the company.

Accessing Liquidity: Some founders, like Ray Kroc of McDonald’s and J.C. Penney of the eponymous retail chain, have used the cash value from whole life insurance policies as a source of capital to fund business operations or marketing campaigns during crucial times.

Wealth Accumulation and Protection: High-net-worth individuals use cash-value policies to store assets with tax-deferred growth and accessible funds, offering a degree of safety and stability that might not be available elsewhere.

5. THE FOUNDER PRINCIPLES THAT REDUCE DISPUTES

Insurance planning for founders works better when you follow these principles:

5.1. One policy, one job

Each policy must have a written purpose: estate liquidity, key person, buy-sell funding, or family equalization.

5.2. Control must match intent

Ownership, beneficiary designations, and access rules must align with the goal, especially when heirs are minors or there are multiple family branches.

5.3. Premiums must survive bad years

If you can’t pay premiums during tough times, the plan is weak. Make sure it can handle stress. Some plans offer a 30-day grace period.

5.4. Coordination beats “insurance only.”

Your insurance should match your will, any trust plans, and shareholder agreements.

6. A SIMPLE 30-MINUTE FOUNDER INSURANCE CHECK

In 2026, making changes is more thoughtful and low-key. It works best when the next step is easy.

Take a sheet of paper and answer these now:

A. Liquidity needs if you die in the next 12 months

• Estimated settlement costs and taxes
• Total personal debts and guarantees
• Business working capital gap for 6 to 12 months
• Family runway for 12 to 24 months of household expenses

B. Continuity plan

• Who becomes interim CEO
• Who signs on bank accounts
• Who talks to partners, board, and lenders
• Who has access to key documents and passwords

C. Ownership and transfer plan

• Do you have partners
• Is there a buy-sell agreement
• Is there a valuation method
• Is insurance assigned to fund it

D. Beneficiary and control

• Who receives the proceeds
• If heirs are minors, who controls the money
• If there are multiple families or second marriages, what is the control mechanism

If you can’t answer these questions quickly, you likely need a formal plan. This usually means working with a financial advisor and legal professionals to ensure proper estate planning and coverage. It includes drafting and reviewing legal documents, aligning insurance with your will and trust, and setting clear agreements with shareholders.

7. WHAT ONGOING FOUNDER COVERAGE SHOULD LOOK LIKE

Once a year review

• Coverage amounts versus updated company value and debt
• Beneficiaries and control structures
• Partner agreements and valuation method
• Premium stress test (can you still fund it in a down year)

Anytime trigger review

• New partner, new loan, new major asset purchase
• Marriage, separation, new child
• Major change in business model or geography

8. HOW TO INTRODUCE THIS CLEANLY

If you want to bring this up to partners or family without drama, use this line:

“I want a plan that keeps the business stable if something happens to me, and keeps decisions fair and funded.”

Next steps

If you’re a founder, I can help you determine your cash needs and ensure your insurance matches your estate plan and shareholder agreements.

A short review call is enough to spot the biggest risks and what to fix first.

During the call, we will assess risks, check your current coverage, and discuss any updates needed to align with your financial and business goals.

This approach builds trust and sets clear expectations.