Life Insurance for Business Owners
As a business owner, you have a lot on your plate. There’s the day-to-day of running your business, including work, employees and finances. Plus, you have the always interesting challenge of keeping the kids alive when you get home!
As an entrepreneur, it’s easy to get lost in the day-to-day chaos. But it’s important to pause and think about the what ifs. What happens to your business if you die? Who will support your family? Choosing to carry life insurance helps with many of those hard what ifs.
Life insurance is a funded agreement you make with an insurance company. It states that the company will pay a specific amount of money to a specific person, trust or charity in the event of your death. But how can that help you as a business owner?
Why is Life Insurance Good for Business Owners?
The less worry you have outside of all your responsibilities, the better. If your family and loved ones depend on the income from your business, life insurance can help ensure they have some financial security in the event of your death.
Your family or loved ones could use the payment they receive from your life insurance policy in a variety of ways. It could be used to help:
- Cover your final expenses, like funeral costs (which, you might be surprised to know average between $8,000 to $12,000 nationally)
- Pay any outstanding medical bills
- Continue making mortgage payments
It could also be used for business expenses. For example, your family could use the payments toward any outstanding debts you may have relating to your business venture.
Another benefit of life insurance for business owners is that it can help your business run in the event of your death by funding a buy-sell agreement. Buy-sell agreements help you answer key questions like “What if you or a partner were to die suddenly?” It works like this: participating business owners purchase a life insurance policy on the other owners’ lives. Then, those proceeds can be used to purchase a deceased owner’s shares.
Can Life Insurance be an Employee Benefit?
Offering life insurance to your employees can benefit your business, too! Think about it – it’s not only important for you as the business owner to have life insurance, but it’s important to protect the people who help keep your business running. Some companies use life insurance as a way to attract top talent and keep their best employees. In most cases, the business will pay for the policy premiums but the employee owns the policy. The employee can even use the cash value their policy may build toward retirement savings or to pay off debt if the policy has that capability. Remember, doing this will reduce policy benefits.
Life insurance is an important step in planning for your what-ifs – whether you’re years from retirement or working on your exit plan. With that said, it may not be right for every business and owner. A financially secure business, emergency savings to get your family through tough times, and/or short-term disability income insurance all may be needs that take priority over life insurance. Talk to an agent/producer to get help identifying your needs and learning what life insurance options may work for you.