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You could make a binding, lifetime agreement that the group will collect sufficient money from each member at the beginning of the year so that on learning of any member's death, $1 million will be paid out of the group's accumulated funds on behalf of the grieving spouse, regardless of when death occurs. You might start with a group of 1,000 of your closest and dearest friends who are in the same age group and predicament. If life insurance didn't exist, what would you do to make sure that, in spite of the low odds of death at such a young age, you could mitigate the financial disaster that death would cause? You are 37 and concerned that if you die prematurely, your family will be struggling to pay its bills. The question of whom to insure and for how much would generally first be based on a calculation of the expected financial loss to the business from that individual's death, irrespective of potential insurance proceeds. However, if that sitekeeper's unique ability, longevity, and expertise is key to providing a current stream of accurate and credible accounting data, the "valuation" picture might change significantly. Certainly, the death of a chief executive officer will have a harsher economic impact on the company and its shareholders or partners than the loss of a sitekeeper. Key person life insurance often requires a sophisticated approach to the "how much" question.

Life insurance can be an excellent way to equalize the value of the legacies to the uninvolved family members, the calculation of which should be fairly straightforward. Testamentary provisions, trusts, and/or business buy-sell agreements may be used to effectively transfer the business to active family members at the death of the founders, but it may be inappropriate to equally transfer business interests to the uninvolved family members. It's not uncommon in family businesses for one or more adult children to not be involved in that business. The distinction here is that should be considered if the magnitude of death and its financial consequence is so great that it would imperil the survival of the business or have an unacceptable effect on the financial statements of the business. Loss of irreplaceable management skill; Once defined, the next step is to determine whether that loss is potentially so significant that it should be insured. Issues to be considered include the following: Loss in "market" valuation, whether the business is privately or publicly held; Loss of current or future business opportunities.