When you own a business, life insurance isn't just about protecting your family—it's about protecting the enterprise you've built. The right policies can fund buy-sell agreements, compensate for the loss of key employees, and ensure your company survives unexpected transitions. The best insurers offer specialized riders and solutions designed specifically for business owners.
Based on market analysis and industry expertise, here are the top companies for business owners, with a spotlight on Principal—a leader in this space for over 20 years.
Principal Financial Group – Best Overall for Business Owners
AM Best Rating: A+ (Superior)
Principal stands out as the premier choice for business owners, and for good reason. The company explicitly focuses on the business market, offering solutions for business owners, key employees, and their families . With over 20 years of leadership in this market, Principal has refined its offerings to address the most common business insurance needs.
What Makes Principal Exceptional:
Principal's business solutions cover a comprehensive range of needs:
Business succession planning – Helps ensure your business transitions smoothly when it's time to pass it on
Key person protection – Explores ways to help protect your business from the financial risks of losing a key employee or owner
Key employee retention & retirement – Offers benefits that make a critical difference in retaining top talent
Nonqualified deferred compensation plans – Including those funded using corporate-owned life insurance (COLI)
Trust-owned life insurance solutions – For business owners and key employees
Specialized Riders and Features:
Salary Increase Rider – Allows coverage increases based on salary growth without additional underwriting
Business Value Increase Rider – Increases policy face amount every three years based on business value, without evidence of insurability
Conversion Extension Rider – Extends the window to convert term policies to permanent coverage
Considerations:
Conversion windows without the extra rider are more restrictive
As of April 2025, the minimum face amount for issue ages 66+ is $1 million
Who It's Best For: Business owners who need comprehensive coverage spanning succession planning, key person protection, and employee benefits—all from a single provider with deep expertise in the business market.
National Life Group – Best for Whole Life Business Solutions
AM Best Rating: A+ (Superior)
National Life Group recently ranked as the second-best whole life insurance company by The Wall Street Journal, with specific benefits that appeal to business owners . The company has been providing whole life insurance since 1851 and offers products that can serve both personal and business protection needs.
What Makes National Life Group Exceptional:
$3 million available with accelerated underwriting (no exam) for buyers up to age 50
Wide range of riders to add coverage or features tailored to business needs
Several options available for using dividends, providing flexibility for business financial planning
Strong A+ (Superior) financial strength rating from A.M. Best
Who It's Best For: Business owners prioritizing whole life insurance with strong dividend performance and flexible coverage options.
Life Insurance as a Business Tool – Understanding Your Options
Key Person Insurance
Key person insurance is a life insurance policy that a business takes out on a vital employee, executive, or owner whose death would significantly impact operations . The business pays the premiums, owns the policy, and receives the death benefit if the insured person dies.
How It Works:
Premiums are not tax-deductible, but death benefits are generally received income tax-free
Coverage amounts typically range from 5-10 times the key person's annual compensation, with high-revenue generators possibly warranting 10-20 times their economic contribution
What the Death Benefit Can Cover:
Buy-Sell Agreement Funding
A buy-sell agreement defines how ownership interests will be transferred if an owner dies, becomes disabled, or retires . Life insurance provides the financial resources to facilitate this transition.
Two Types of Buy-Sell Agreements:
Entity-purchase agreement – The business buys out the owner's interest using the death benefit
Cross-purchase agreement – Each stockholder owns a policy on the others; the death benefit purchases ownership from the deceased owner's estate
Important Tax Consideration: A recent Supreme Court case established that life insurance proceeds used for redemption obligations may be included in the company's valuation for federal estate tax purposes . Consult with your tax advisor before structuring a buy-sell agreement.
Executive Benefits and Deferred Compensation
Life insurance can also be used in businesses that offer deferred compensation plans. Companies can allow highly compensated employees to defer income and receive it later, usually in retirement, while the company buys a policy on that employee and uses the policy's cash value to fund the deferred compensation when it's due .
What Business Owners Should Look For
When choosing an insurer and policy for business purposes, consider:
1. Specialized Business Riders
Look for insurers offering salary increase riders, business value increase riders, and conversion options that don't require new medical underwriting.
2. Integration with Succession Plans
Coordinate coverage with your established succession planning timeline. If your plan calls for leadership transition over 5 years, structure policies with terms that provide maximum coverage during years 1-3 when dependencies are highest .
3. Tax-Efficient Ownership Structures
Consider having the business own policies on non-owner employees while using personal ownership structures for owner-executives. Irrevocable life insurance trusts (ILITs) can remove proceeds from taxable estates while still providing business protection .
4. Regular Policy Reviews
Implement annual reviews to evaluate policy adequacy, beneficiary designations, and alignment with evolving business strategies . As businesses grow, coverage amounts may need adjustment.
5. Financial Strength
Look for A.M. Best ratings of A (Excellent) or better, indicating the insurer's ability to pay claims.
Quick Comparison Table
Final Thoughts
Life insurance is one of the most powerful financial tools available to business owners. Whether you're funding a buy-sell agreement, protecting against the loss of a key person, or structuring executive compensation, the right policy from the right provider can safeguard everything you've built.
Principal leads the market with its dedicated focus on business solutions and over two decades of specialization. National Life Group offers exceptional whole life options with strong dividend performance. The best choice depends on your specific needs—whether that's succession planning, key person protection, or a combination of both.
