Life Insurance for Business Owners, a Guide to Getting Coverage

If you are a small business owner you will want the business to grow and even outlive you. Your family members are not the only individuals that majorly benefit from your enterprise. Your unplanned death may cause a negative ripple effect on your employees and even partners. As an end result, it can pierce through the heart of the business and render it obsolete. A company you have worked hard for should not be destroyed by such a circumstance that can be avoided.

A lot of small business owners are unaware of how beneficial it is to have life insurance coverage. Just like the big businesses that spare no expense when it comes to getting coverage, a small business owner shouldn’t lag behind in doing so too. A great number of advantages come with having a life insurance policy, this will not only ensure the prosperity of your business but also ensure the smooth running of it.

Reasons You Need Life Insurance When You Own a Business

There are a number of reasons to why a business owner will need life insurance coverage. Listed below are key reasons why life insurance is important to the owner of a business.

Small business administration loan

As a requirement to get a small business administration loan one has to have life insurance coverage. Just like a bank loan, the SBA loan that is given by the government to help the growth of small businesses for low-interest rate, it needs you as a business owner to have a collateral assignment. This will help in servicing the loan in the case of your death.

Collateral assignment

When getting life insurance you will have to list down your beneficiary in most cases it is usually a family member. When getting life insurance for a bank loan it follows similar guidelines. You will have to assign a primary beneficiary, but you will still have to ensure the bank will be listed as the collateral assignee. In case you die before paying off the loan, the bank will get paid by part of the life insurance death benefit. After which your primary beneficiaries will get the remainder.

The main reason a business owner will want to get a life insurance policy is to get the loan approved.

Key employee coverage

When you get insurance, you are anticipating the chance of incurring a future financial loss. A business owner can put an employee as an insurable interest because losing a key employee can be equated to great financial loss. A business owner can use life insurance to pool a number of competent employees to his or her business. It is on the employer’s side that he or she might decide to get an insurance policy, which will be of great use to the employee as well as to himself or herself.

Family benefit

The beneficiaries of most life insurance policies are usually the family. As a business owner, it is evident that you are a breadwinner in the family. When you die the family might be faced with a lot of challenges. The life insurance death benefit is to cushion the blow dealt with the family. It will help stabilize the situation at hand as they decide on their way forward with regards to the business.

Secure capital

Life insurance can be referred to as a great place to secure business capital. The business owner who is the rightful owner of a life insurance policy has the advantage of gaining a cash value that arises from the policy at hand. He or she has the power to direct in what way the cash value will be used, the cash value can be used to foot and satisfy any business expenses. Instead of bending over backward trying to pay high-interest rates from financial institutions, the business owner gains the power to cater to their own expenditures. It is important to note that life insurance policies that present you with a cash value option in their terms are ideal places to store business capital.

Consider your options

In the event your death comes prematurely, a person’s life insurance will help protect their family. But that is not the only purpose. In the case where you as the sole owner of the business, a partner from the firm or even an employee who is believed to be a great asset, dies. Insurance plays a role in maintaining the smooth running of the business in such a situation.

There are two key life insurance policies that yo can consider, namely term and permanent life insurance. Here you will get to see a brief comparison of the two.

Term life insurance is a more simple option. In it one chooses the death benefit; who you want to be the beneficiary in most cases it is your family members and how much the beneficiary will get. You also get to choose how long the insurance policy will be in force.

On the other hand, we have permanent life insurance. This type of life insurance is quite expensive when compared to term life insurance. The policy remains active for the length of your life so long as payment of the policy’s premiums is followed as stipulated. This type of insurance policy has a great following from individuals who desire to be insured for longer than a specific term.

Depending on the design of a whole or universal life insurance policy, you are presented with different options when it comes to how you may use the cash value. One of the options beings, you have the power to decide on what to invest in with cash value that has accumulated. Another option is that you can use the cash value to pay part of the premium. It the case you die while under the coverage your beneficiary will not only get the death benefit but also enjoy the cash value. With a GUL policy, you get a permanent policy without the cash value, which tends to drive the cost down and make it more affordable.

Why choose Term insurance as a business owner

Money is always a factor in making big decisions, it is no exception when choosing an insurance policy. Many individuals will go for term life insurance just because it is cheaper compared to the other, but it comes with no surprise that there are more advantages to choosing term life insurance.

Apart from the fact that it is a coverage that is temporary and does not stretch for the entirety of your lifetime, it is also a good option for the business owner who has a partner that may be retiring at a particular date and time in the future. In this case, if you and your partner had taken term life insurance, and by so doing made each other as the beneficiary to one another.

As a beneficiary, you will get to enjoy the death benefit and by so doing,  get the chance to buy out your partner’s share from his immediate successors.

On the downside, term life insurance does not accumulate a cash value component meaning that the insured individual cannot borrow against the loan. On the bright side, the life insurance policy that great for young families. The reason for this is that it is less expensive compared to other insurance policies, plus most business owners head a young family set up. 

A lot of new families face great strain when it comes to finances, including the expenses of raising their young ones, servicing some personal loans and paying off mortgages. Mental and financial relief can be ensured by taking up a term life insurance policy.

One has the power to convert his term life insurance policy to a universal or whole life policy. This feature can definitely help in catering for a policy owner who is affected by a peril that might bring about disqualification for another term life insurance policy. The cost of the premium is unchanged as one changes to the whole life policy.

How to get life insurance as a business owner

Several options for affordable life insurance are present in the market. If you do not put great effort into getting insured, it may lead to a shortened life of your business venture or even cause great strain to your family. Do not be a sitting duck waiting for the worst to happen so as to react to it. Safeguard your family’s finances early.

There is no big difference between when it comes to buying life insurance for a business owner and a non-business owner. The steps that are to be followed are one and the same.

In a nutshell, the process follows these steps:

One has to assess and get a clear picture of the needs for your coverage this might include the multiple policies that are being offered. Compare the policies from one insurer to the other and at the same time get quotes to see the ranges in prices. Finally, choose the most suitable insurer as per your needs, submit an application that is properly filled and proceed to take a free medical exam. Wait for underwriting approval, sign the policy and you’re done!

The great difference comes about by the fact that for a business owner he or she has to apply for more than one life insurance policy. The policies may comprise, a life insurance policy that will safeguard the interests of the family and another that will carry solely the interest of the business. The complicated bit about all of this is the mere reason that the entire process of getting insured becomes slow.

Away from that being a business means you are looking for affordable insurance coverage that will ensure your pocket is not drilled as you run your business. Some few tips that a business owner should have in his or her fingertips:

There are a hundred different companies that offer different policies for different prices. You don’t have to waste a lot of time going to all of these companies. What you need is an independent insurance broker. The broker should not have ties or affiliation to any specific company. The independent broker will help in making well thought out decisions to help get the perfect coverage for your needs. Questions may arise that you might feel you can’t tackle them by yourself but with the broker, a phone call or a visit away can help clear your worries.

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Taking a little time to see if you can enjoy peace of mind after you get coverage for your business that could act as a lifeline if the case of the worst happening. We specialize in getting coverage for business owners. Give us a call today and see what we can do for you, or compare quotes instantly on this page.