If you thought life insurance policies were only purchased by individuals to protect their personal assets and provide for their families, think again. As a business owner, life insurance can be vital for protecting your business, as well as your family from financial ruin due to the unexpected, such as death.
Having a life insurance policy for your business can:
- Protect the business from closure in the event of the owner’s, partners’, or key employees’ death
- Provide cash to repay debts, distribute money to investors, and pay employees severance so bankruptcy doesn’t have to be filed
- Reduce income and estate taxes
If you are a small business owner, often your entire life savings is invested in the business. If you were to die suddenly, would your business fall apart? Would your employees and family lose all their assets? You’re able to tailor a policy to meet your specific needs, such as your employees being able to purchase the company after your death, or you can even state that you want a replacement to be hired. If there is more than one owner for the business, a life insurance policy can be taken out on each of the co-owners, so if one of them dies, the insurance payout can be used to buy out their stake in the business. This ensures the running of the business without interference from the deceased partner’s family.
Sometimes having life insurance is required before securing a bank loan for your business. Term Insurance is the more common type of life insurance and it lasts for a specific number of years (usually until retirement). If you die during that specified amount of time, your beneficiary receives the full amount of the benefit. Permanent or Whole Life Insurance costs more, but it remains in effect until the day you die, as opposed to Term Insurance which has a term for a set amount of years.
Which policy is right for you? How much insurance do you need? Only a qualified insurance agent can help you decide what would be best for you and your company. Plan for the unexpected before it’s too late.