8 Myths Business Owners Believe About Life Insurance
Business owners are likely to believe several myths surrounding life insurance, such as it only coming into play when someone dies or life insurance policies being too expensive.
Whether these are mistakes born from misinformation or a lack of information, Canadian business owners deserve to know the truth about what life insurance can do for their company.
Myth #1: Life Insurance Only Comes Into Play After Death
While it is called life insurance, you can receive benefits without someone dying. Businesses can leverage life insurance to add value without anyone dying.
Life insurance can reduce the amount of taxable income, reducing the amount a business pays out for taxes.
Beyond this, offering life insurance is a major selling point for many employees. We will look at this later in the article, but even the mention of life insurance can attract some major players in your industry to your doorstep.
Myth #2: All Types of Life Insurance are the Same
To start, there are two general types of life insurance: term life insurance and permanent life insurance. These meet different needs, and they have different costs involved.
Even within the two umbrella categories of life insurance, you have plenty of variables to consider, including:
- The duration of the policy
- The policy amount
- What is covered
- The terms of the policy
- Payout conditions
- Savings components
When you consider all of these things it is clear that life insurance is not a situation where you have a few options to choose from. Life insurance policies can be moulded to fit your preferences, even if you’re unsure whether you need life insurance or if you want to learn exactly what needs a business can have covered by life insurance.
Myth #3: Employees Do Not Care About Life Insurance Benefits
As previously stated, offering a life insurance policy for your employees or certain positions helps you stand out above the rest. People enjoy working for someone who invests in their present and their future, and life insurance policies are a fantastic way to do so.
Beyond that, employees with families and dependents feel more at ease when they know their loved ones will be cared for after they die. Reducing stress in this area can lead to improved employee performance and satisfaction in your workplace.
Myth #4: My Family is Protected From Business Expenses if I Die
A big misconception is that your family and other loved ones in your life will not be affected by your death financially. Even if they are not taking on the burden of things like business debt in life insurance, the reconciliation comes from funds that would otherwise go to pay for after-death expenses or help them stay afloat.
Life insurance policies are a great tool to use to help manage any outstanding debt you have, as well as cover the costs of your funeral and any personal debts you leave behind.
Myth #5: Only Those With Dependents Need Life Insurance
Even if you do not have a dependent, your debt can be passed onto others in your family or an executor.
Many people consider life insurance as a way to mitigate the loss of their income for their dependents, so not needing to do so is a valid argument. Life insurance and estate planning policies are still a great way for the policy holder to earn income while they are alive and to pass on funds to a beneficiary after death that is not a dependent.
If you have a cause that you are especially passionate about you can set up a policy that donates the funds in the event of your death.
Myth #6: I Should Buy the Smallest Policy Offered to Save Money
Buying the smallest policy might seem like a good choice, but if it is not enough to cover the expenses or needs of the business in the event of your death or another employee’s then you are only hurting yourself in the long run.
This does not mean that you need to run out and buy the most expensive policy out there, but taking the time to figure out what you need and how much that will cost is the most effective way to handle future expenses and situations. By purchasing the smallest policy you are more likely to harm your business in the long run.
Myth #7: Investing Money is More Important than Purchasing a Life Insurance Policy
Life insurance policies are not a method of investment, and they should not be treated as such. Both are important to the well-being of your business, but they function in different ways.
Investments help you in the near future while life insurance policies protect your business long-term.
There is also that immediate benefit of employee attraction and satisfaction to consider, but these two aspects of business financing are on different playing fields, and purchasing a life insurance policy is just as vital to investing in your company’s growth.
Myth #8: Life Insurance is too Expensive for My Business
Many business owners dismiss the idea of which life insurance to purchase because they think their business will not be able to afford it, but in most cases sitting down to figure out the costs will surprise them.
Life insurance policies can be manipulated to fit the financial availability of your business, and you are likely to find one within your range.
When it comes down to the short and long-term benefits of offering life insurance at your business it becomes clear that failing to lock down a policy costs your business too much in the long run. By saving some money month to month you risk too much.
Life insurance policies can be difficult to navigate, and it is no surprise that there are so many myths surrounding them for business owners. With a little bit of knowledge, it becomes clear that life insurance policies are great for individuals and businesses alike.
If you would like to learn more about what life insurance can do for your business (and to debunk any other myths you may have heard) do not hesitate to contact Sim. Navigating life insurance can be difficult to do without a guide, and you will not find anyone better suited to help you prepare for the future.
Essential Planning for Financial Security
Helping business owners and self-employed professionals grow retained earnings tax-free, pass more wealth to the next generation, and protect their biggest asset – themselves, the executive of the business by acquiring a key person life insurance policy.
Other FAQs Regarding Life Insurance as a Business Owner
- How Does Life Insurance Policy Work for Business Partners?
- How can I Protect a Business Loan with Life Insurance?
- How Can I Protect My Employees With Life Insurance?
- What Are The Benefits of Life Insurance For My Business?
- Why Should I Choose Term Life Insurance As a Business Owner?
- Can My Business Pay for My Life Insurance?
- How Much Does Life Insurance Cost for Small Business Owners?
- Does Whole Life Insurance Accumulate a Cash Value for My Business?
- What Are My Life Insurance Needs As a Business Owner?
- A a Business Owner, Why Should I Select Whole Life Insurance?
- How Does Key Person Life Insurance Work?
- Is Life Insurance Taxable in Canada For Small Businesses?
- How can Life Insurance can Help Me as a Small Business Owner?
- How can Whole Life Insurance Help my Small Business?
- How can my Business Benefit from a Universal Life Insurance Policy?
- Why is Life Insurance Important as a Business Owner?
- What Types of Life Insurance is Available to Me as a Business Owner?
- Can I Purchase a Group Life Insurance Policy for My Company?
- Are There Any Strategies That I Should Follow When Purchase Life Insurance for My Business?
- What are The Best Life Insurance Products Available to Business Owners?
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