{"id":1132,"date":"2024-07-23T04:45:23","date_gmt":"2024-07-23T04:45:23","guid":{"rendered":"https:\/\/www.acceptanceinsurance.com\/blog\/?p=1132"},"modified":"2024-07-23T04:45:24","modified_gmt":"2024-07-23T04:45:24","slug":"life-insurance-small-business-owners","status":"publish","type":"post","link":"https:\/\/www.acceptanceinsurance.com\/blog\/life-insurance-small-business-owners\/","title":{"rendered":"The Importance of Life Insurance for Small Business Owners\u00a0"},"content":{"rendered":"\n

Perhaps you already know how critical your life insurance policy<\/a> can be in protecting the future of your loved ones when you are no longer there. But there\u2019s even more to it if you own or co-own a small company. <\/p>\n\n\n\n

Read on and find out the importance of life insurance for small business owners, their partners, investors, and employees, as well as family members at home. <\/p>\n\n\n\n

Understanding Life Insurance for Business Owners<\/strong> <\/h2>\n\n\n\n

As soon as you have loved ones to protect financially, you should get life insurance.<\/a> In addition, as a business owner, you have a unique set of demands that suggest coverage as a good option. <\/p>\n\n\n\n

In some ways, you can think of your small company as a living thing. With your sudden departure, the withdrawal of your finances, experience, expertise, and leadership could cause it to wither and die. Your partners or investors know that. That\u2019s why they will often insist you obtain a life insurance policy before they sign on or write a check. <\/p>\n\n\n\n

The idea is that if the skills you brought aboard were suddenly lost, the company could falter, and everyone would lose their jobs and investments. The company would need both time and financial resources to fill your shoes and get the company moving in the right direction again. Those financial resources could come from the death benefits of such a policy. <\/p>\n\n\n\n

Types of Policies to Consider<\/strong> <\/h2>\n\n\n\n

Business owners need to consider how they are going to protect their interests across the board. If you have employees, you\u2019ll need worker\u2019s compensation, as determined by state and federal regulations. If you have any vehicles you use in the course of business, you\u2019ll need to consider protecting your business with commercial auto insurance<\/a>. There are many types of insurance to protect your company, and life insurance is an important one. <\/p>\n\n\n\n

There are several types of life insurance for business owners, each with a different package of benefits, but the most popular are whole life, term life and key person insurance.  <\/p>\n\n\n\n

Whole Life Insurance<\/strong> <\/h3>\n\n\n\n

Much as it sounds, permanent whole life covers as long as you live \u2014 or at least as long as you continue to pay your premiums. In other words, you will have a guaranteed payout. <\/p>\n\n\n\n

Another value to a growing startup is that this policy offers a cash value, a sum of money that builds over time and can be taken out of the policy as a loan. <\/p>\n\n\n\n

Term Life Insurance<\/strong> <\/h3>\n\n\n\n

Term life offers a death benefit for a designated period. Many term life policies for business owners range from ten to 30 years, though the term can be as brief as a single year. <\/p>\n\n\n\n

One of the benefits of this life insurance<\/a> is that coverage is cheaper than whole life because the death benefit isn\u2019t guaranteed. If you\u2019re 35 when you get a ten-year term policy, and you\u2019re in good health, the underwriters assume good odds that you\u2019ll still be alive at the end of that decade, so there will be no payout. However, it can keep investors and partners happy because they have a level of financial security during the first years of the growing business. By the time the term ends, the expectation is that the company will be in better financial health, and the policy will be unnecessary. <\/p>\n\n\n\n

Key Person Insurance<\/strong> <\/h3>\n\n\n\n

Key person insurance protects the company against the sudden loss of an important person. This could be a financier, an owner or an especially valuable employee. The business owns the policy and any benefits go to the company. This type of life insurance is sometimes a requirement when seeking financing. <\/p>\n\n\n\n

\"Fashion<\/figure>\n\n\n\n

How Life Insurance Protects Your Business Assets<\/strong> <\/h2>\n\n\n\n

As the owner of a small company, your main asset is\u2026 you. There might also be key personnel on your staff with unique skills or talents, whether in technology, sales or business contacts, finances, or other areas. <\/p>\n\n\n\n

If you or any of your key personnel were lost, it could be financially damaging or even fatal for your company. Those are the assets that must be protected, and whole or term life insurance policies could provide that cushion. <\/p>\n\n\n\n

Eventually, you can find replacement personnel or figure workarounds that keep your company solvent, but the financial resources from your policies can help the company continue to make payroll as it works out the necessary solutions. <\/p>\n\n\n\n

The death benefit might also be used to protect physical assets, such as a building mortgage or inventory. <\/p>\n\n\n\n

Navigating Life Insurance Options: Guidance for Overwhelmed Business Owners<\/strong> <\/h2>\n\n\n\n

Some small company owners might have two policies: One for the benefit of family members or other surviving loved ones and the other for partners, investors, or the company itself. <\/p>\n\n\n\n

However, it\u2019s possible to carry one policy that serves both purposes. This strategy is called a buy-sell agreement. <\/p>\n\n\n\n

Here\u2019s how it works: Let\u2019s say you co-own a company with one equal partner, and you estimate that both shares are worth a half-million dollars each. Both you and your partner buy life insurance policies with a $500,000 face value (the death benefit), each listing the other as a beneficiary. <\/p>\n\n\n\n

If either partner dies while in business together, the beneficiary\u2019s $500,000 will be used to buy out the inherited share of the deceased partner, making the surviving partner the sole owner. If you should die with this policy in force, your loved ones will be as financially protected as if they were the beneficiaries of your coverage. <\/p>\n\n\n\n

You have a few factors to consider. Just as you\u2019ll meet with investors, lawyers, and accountants, you must make contact with at least one more professional advisor as you establish your company: your life insurance agent. This expert will help you figure out the best strategy for protecting your business and the financial security of your loved ones if anything should happen to you. <\/p>\n\n\n\n

Here are some of the questions you should ask yourself \u2014 and discuss with your agent. <\/p>\n\n\n\n