Business owners need life insurance that covers both their personal and business lives and offers support for things like replacing income, covering debts, facilitating any transitions, and serving as collateral for loans.
While life insurance is not always a need for individuals, small business owners need it to cover a multitude of expenses. This does not even cover the many benefits, but we will explore everything below.
Life Insurance Needs for Personal Life
When it comes to your personal life then a life insurance policy is essential for replacing the income that your dependents or family rely on, covering any outstanding debts, and taking care of end-of-life expenses.
Life insurance can make a difference for business owners that do not have retirement plans or savings to help with these things, and they do the extra work to take care of loved ones even after you are gone.
If your family relies on your income for day-to-day expenses then life insurance should be able to offset the loss of that money coming in. Your policy needs to be substantial enough to float any dependents for the proper period of adjusting.
Even if you have a partner who works and can cover the bills, you need to also consider the domestic responsibilities you take care of. If something were to happen to you then your family would have the additional stress of covering these duties or paying someone to do so, and it is not usually easy to do either.
Life insurance policies can be used to provide care for dependents as the years go on, even after you are gone, and are one of the most responsible ways to provide care for those in your life.
If you have any debts you are leaving behind, business-related or personal, life insurance can handle these without affecting your loved ones. It is a common misconception that all debt is immediately forfeit when someone dies, and that is not necessarily true.
In many cases debt is handed off to someone else who can be held responsible for it, or it can be taken from the potential inheritance of children or other family members. You may believe that you are leaving a legacy for your family when in reality your debt will eat up anything you leave behind.
Life insurance helps you manage your debts even after you have passed on.
End of Life Expenses
The last thing that family and friends need in a difficult time is to be handling end-of-life expenses or trying to figure out how to pay for them. When you have a life insurance policy you can offset these costs, even if you do not have any money set aside to do so.
Life insurance goes beyond financial compensation and protects those you love during mentally trying times.
Life Insurance Needs for Your Business
There are also several reasons you need life insurance to cover your business, like improving employee satisfaction, compensating for the loss of key employees, smoothing out transition periods, and providing collateral for loans.
When an employer shows an interest in the financial well-being of employees and their family it goes above and beyond what people have learned to expect from employers. As long as you are consistent with this care you can expect employees to have more pride and work ethic when completing tasks at your business.
Offering life insurance policies at your business can also help you stand above competitors when you are looking to hire qualified individuals. Potential employees will always choose the workspace that suits them best, and if they have to choose between benefits or having none then they will choose benefits every time.
Key Employee Insurance
You can probably think of a few key individuals in your business that cannot be immediately replaced. When you have key employee insurance the policy can help offset their loss.
This is a difficult time for people in your business, and needing to pick up the extra work can be impossible without additional help. Key employee (or key person) insurance can help to keep the business going by:
- Paying business loans or losses
- Buying back any shares
- Covering the cost of replacing the employee
If this is not enough to keep the business topside up then the key employee insurance can also pay severance costs to help other employees as they move in different directions in life.
Life insurance agreements like the key employee insurance option are key to buy-sell agreements in the event of someone’s death. Life insurance works beyond a will because it gives the company or the co-owner the financial means to offset costs like purchasing the other individual’s shares instead of tossing them into the employee’s estate.
Without a life insurance policy that lists the business as the beneficiary, it may be left with a family member taking up those shares. This may work out in some cases, but unless it is previously discussed it can do more harm than good.
Collateral for Loans
A reason to secure life insurance for your business that is not directly related to the policy payout is the potential to use life insurance policies as collateral for loans. Lenders can be listed as beneficiaries, and the potential payout is sizable enough to give you access to business-changing loans.
This is one of the ways that life insurance can pay off even before tragedy strikes.
Business owners do not have the same luxury of looking at their financial situation and deciding to go without life insurance. There are too many variables that can upset the financial situation of a business or a business owner to go without this bit of security.
If you are on the fence about whether you need life insurance or you want to know exactly what business needs life insurance can meet then contacting Sim Gakhar is the next step. Speaking with someone who understands the industry in and out can serve you with the knowledge you need.
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 key person of the business.