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Life Insurance Options for Business Owners
Crucial Kinds of Business Life Insurance
Through whole coverage and life insurance without physical exams, people of all kinds find it responsible and useful to take out policies on themselves to protect their families and loved ones. But, businesses also stand to gain from the protections and security that life insurance can provide those who depend on them.
In fact, many important business needs and risks are solved through the purchase of a life insurance policy. While personally focused policies protect families and dependents from the loss of a main provider, businesses also stand to experience financial loss and endure struggle after an owner or key employee passes away.
The loss, of course, is not quite the same, but a business does not stand to gain from going uninsured. And, it can actually suffer tremendous losses that ultimately lead to the failure and closure of a business. If not, the business at least has to scramble quickly to fill a role or replace a leader without losing its footing in the market.
In light of this, businesses plan for the worst and hope for the best by choosing from a few different kinds of life insurance designed specifically for owners and key employees. Learn which areas and policies might help to protect and promote your business below.
Small businesses often find that they can secure loans from the SBA by taking a life insurance policy out as collateral to the bank providing the loan. Ultimately, this protects from the unfortunate and untimely death of the insured business owner. The collateral assignment to the bank is lifted once the loan is paid.
With a whole life insurance policy, business owners can provide their employees a benefit. The policy can be flexible to suit the needs of the business owners means and the needs of their employees. Usually, this means that the premiums for the policy are paid by the business, incentivizing employees to stay with the business and enjoy the benefit.
In the case of a business with multiple partners or owners, the group can agree that if one of the owners is unable to fulfill their function, they will sell their share of the business to the able, remaining members. In the event of death or disability, this kind of agreement can be funded with a life insurance policy, covering the liability involved for a lower cost.
Though such an agreement doesn’t necessitate a funding source, it’s important that the business be capable of finding the buy-sell funds in the event of death or disability. This is often a significant portion of resources that can become an obstacle to the remaining owners.
Life insurance is an option that these remaining business owners and operational partners can safely fall back on rather than taking out high-interest loans to complete the sale.
Owners and employees can see an advantage from group policies, especially when it’s a challenge to get good rates and acceptance privately. While many can secure attractive premiums and coverage amounts at a young age without much difficulty, older employees may struggle on their own to find an insurance company to adequately cover them at a fair price.
“Key Man” Insurance
Small businesses in particular rely on a handful of people to keep operations running and the course of business flowing. Sometimes it is as serious as having just one individual (often the owner) who is crucial to the tempo of the company. In this situation, the loss of the “key man” could halt operations and threaten the livelihood of the organization as a whole.
Finding someone to replace and reorganize the company after the loss proves difficult for many businesses that endure such disruption. The beneficiary of “key man” insurance is the business itself, and the insured is the special employee or owner who is irreplaceable to the business at present. If the worst were to happen, the policy would help the business keep itself upright during the transition.
Life insurance for businesses can also feed a personal interest. The insured can use it as a pension fund for themselves in case a need arises, such as with a 401k. This works for qualified plans and can be designed for maximum benefit against taxation to supplement a healthy retirement plan.
Shop for Business Owner Life Insurance
Sproutt is a trusted and forward-thinking life insurance broker for individuals and businesses. Business owners turn to them for the most up-to-date and competitive plans in the life insurance market. See which situations above apply to your business—whether seeking security, employee benefits, or both—and learn from Sproutt which kinds of life insurance for business owners are right for you.
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DISCLAIMER: We hope whatever you find on this site is helpful, but be cautioned that it may not apply to your own situation, or be totally current at any given time. Idea Cafe Inc. and all of its current and past experts, sponsors, advertisers, agents, contractors and advisors disclaim all warranties with regard to anything found anywhere on this family of websites, quoted from, or sent from Idea Cafe. and its related sites, publications and companies. We also take no responsibility for comments published by others on these pages.
TRADEMARKS: The following are Registered Trademarks or Servicemarks of DevStart, Inc.: Idea Cafe®, Online Coffee Break®, The Small Business Gathering Place®, Take out Info®, Biz Bar & Grill®, Complaint-O-Meter®, A Fun Approach to Serious Business, CyberSchmooz, and BizCafe.