- Personal Finance
Life Insurance Can Protect Your Business
If you are the sole owner or a partner in a small business, have you thought about the future of your business? What would happen if you died? What would happen to your business loan? Would your business or share in the business be sold out? Would it continue, with your partner taking over your share? What if one of your important employees is grievously injured, or passes away?
Many small business owners usually put all their savings and assets into a new business. It is therefore only right that they protect their business, their interests and their families in case the unforeseen happens. Term life insurance can protect both your business and your family's interests.
Why term life insurance and not whole life or business-specific insurance?
A small business owner already has a lot to take care of. Business-specific insurances can be quite expensive, and can drill a big hole in the firm's finances. Key Employee Insurance for example is meant to offset the losses that a business would bear if someone you consider as a key employee should die or get permanently disabled. An insurance policy taken out for this purpose will cover any lost revenue that directly occurs from this mishap, and also covers the cost of training a new employee.
The reason why term life is also better than whole life for business insurance is because you are interested in pure insurance, and therefore only the death benefit interests you. Whole life policies prove to be beneficial only if you hold on to them for a couple of decades or more. This is not very feasible in case of your key employees who have no doubt already put in some years in your business, and are likely to retire before the policy touches the twenty-year mark. Further, the premiums for whole life for the same amount of death benefit are easily 6 to 8 times more expensive.
What aspects of your business should you insure with term life insurance?
You can consider term life insurance for the following business purposes:
- To provide for liquidation of your interest in the business, and use it for the benefit of your family
- Each partner and every key employee at your business should have a term life insurance policy in lieu of Key Employee Insurance as explained above.
- If you are the sole owner of the business, and the plan is to sell the business after your death, your business will need to be managed until it is sold. The death benefit of a term insurance policy can provide the cash for the working capital during this period.
- If you have invested your entire savings, and taken a loan to start your business, your family will need a huge death benefit so that they don't go through any unnecessary financial trauma fresh in the face of their grief. Take out separate term life policies that will enable them to meet every conceivable financial obligation, and pay off all outstanding payments on your loans and mortgages.
Term life insurance for each of your insurance obligations serves the purpose, and it is quick and economical too.
Take professional advice to work out your term life insurance needs for your business
To ensure that your business is not neglected, and your family is not burdened, you will need to carefully work out your term life insurance requirements. Meet with your lawyers and financial advisors, and consult your family members too. A tax professional will be able to throw light on the tax implications of the policies you choose to take.
All this may seem too much hassle, but they are necessary steps that you must take to ensure that your business will continue as you intended it to, and to experience the security of knowing that your family will be taken care of, when you are longer around.
And, although this is worth every penny paid, you shouldn't be paying more than you have to and the above tips should ensure you can keep costs down. Just follow these three simple steps to help make sure you find an inexpensive insurance package with low premiums.
Remember, your success in finding the right life insurance package really does depend on your research and your package comparisons. The good news is that the internet makes this easier than ever before, so finding inexpensive life insurance really is a mere click away!