Business owners have a lot on their plate. They not only deal with the costs of keeping their business afloat but keep enough sales rolling in to pay employees and keep them protected with help from insurance.
Life insurance is not a requirement for businesses but, offering policies that employees stand by comes with an edge over the competition and some securities that you won’t find with other mediums.
Why Small Business Owners Need Life Insurance
Business owners are used to toying with risk. When they set out to create their business, they likely did so with a drive that got them to the successful point they are at today.
Those risks are ok and often result in success stories but, once businesses are up and running and providing a job for others, owners have a lot more to think about than just themselves and their goals.
Not only do they have employees that rely on them but, they likely have family and loved ones that rely on them too. For that reason and more, it’s recommended to find a life insurance policy that fits their needs. Life insurance coverage is not a “one size fits all” kind of thing, needing some adjusting to provide the right coverage for all those that need it.
Type of Life Insurance Policies for Small Business Owners
There are several options for life insurance for small business owners. All of them come with certain benefits, though options are better for some than others. To get a better idea of the policy types and how they can work for you, here’s a look at some of the top selected by business owners.
Small Business Group Life Insurance
In this group life insurance policy, the contract is between the insurance company and the group that is insured within the company. Business owners can select groups that qualify for this type of insurance, providing it for all full-time employees or for all of those who are married and have a family to protect. This policy is adaptable and can be made to benefit different companies of all types.
One key benefit is that there are no medical questions involved and it’s offered as a factor of employee’s income. Small business owners will need to pay the premium and nothing more to keep all covered.
It’s an incentive for employees that comes with benefits for employers, making it a win-win situation. The key here is finding policies and making subgroups that benefit all and do not discriminate against any.
Executive Bonus Life Insurance
This type of policy is not for any collective group of employees and only extends to those who are exceptional. Many small business owners extend this type of insurance to those who have been with the company for some time and have proven their loyalty.
The employee does not pay for this policy, the owner does, and in case of the unexpected, the employee and his family will receive the death benefit and it will be 100% tax-free.
There are benefits for both employees and employers, most of which deal with the fact that employers get a tax-deductible for premiums paid for this type of insurance.
Key Person Life Insurance
This policy should be conserved for those who are critical to operations. Key employees are those who are needed to keep things afloat and provide key assistance to the running of the business. With this life insurance policy, owners can not only help key employees provide for their families in an event of death but, it will also help keep the company running in their absence.
When the policy kicks in, the funds received by the business owner are there to help keep the company running, meant to be used to pay employees, keep supplies stocked, and keep payments on loans and more paid down. For this policy, the employer pays the premium, though it pays off with tax deductions and in the event of an unexpected death.
Buy-Sell Agreement Life Insurance
A life insurance policy that’s structured as a buy-sell agreement is one that benefits both employer and employee. This policy too is extended to those who play a key role in the company, often saved for partners or other key members that are critical for operations.
With this policy, the event of a death of a critical partner will result in the division of business shares, adding the deceased employer’s part into the company as an investment. Owners are the ones that buy the policy and can choose whether or not to include it as part of the stock redemption plan.
This plan allows the company to purchase the deceased employee’s share at the fair market value with the death benefit, keeping it within the company.
Business Loan Life Insurance
One thing that a lot of employers don’t think about is the fact that they need life insurance in order to secure funding. In most cases that involve large amounts to help owners grow and expand, the owner will need life insurance of some sort.
In these cases, owners usually choose term life insurance, as they tend to come with lower premiums, and they cost way less than permanent or whole life insurance policies. While this is an option, there are many others like estate planning life insurance that could be more beneficial, all of it takes weighing the odds and ensuring that all features and prices are considered beforehand.
Affordable Insurance with A Knowledgeable Agent
Navigating through all the paperwork and finding policies that work best for employers and their employees can be challenging. Not many business owners have time to skim through all the options, which is why it’s recommended to leave it to an agent that knows all the options.
For a detailed look into your business structure and which policies can benefit you and your employees, give Sim a call. She can provide you with options and answer any questions you might have about your policies and all the options that come along with them.
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?
- What Are Some Myths Business Owners Believe About 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 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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