Ever wondered why life insurance isn’t just about your life but your business as well? Life insurance gives you massive financial protection once you purchase it. Apart from that, there are other ways life insurance can be beneficial to your business investment.
You can use it to attract great talents and increase employees’ loyalty, by the protection it can give to their loved ones.
Remember, that as a business owner, you put so much effort to make sure your business yields profits and grows. Hence protecting your family and employees depending on your business is a great idea.
Generally, life is filled with lots of uncertainties. So providing diverse forms of business insurance such as property and liability insurance is important. But you must not also forget to protect your investment with life insurance. In this article, we will share with you the many benefits of protecting your business with life insurance.
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Reasons for purchasing life insurance
At a first glance, you might view life insurance as a waste of funds. Perhaps because it does not apply directly to your business. However, life insurance is also an important business investment. One great way is what happens to your business continuity, if ever uncertainties happen. Your family will have funds to rely on, instead of selling your business to raise those funds.
As a small business owner, purchasing life insurance is a must as it can help protect your business continuity if ever there are worries about whether your business can continue without you. This will even factor in other things.
For instance, if you have a life insurance policy as a business owner, you stand a better chance of securing a business loan from a bank than other business owners that do not have life insurance policies. Because, if you suddenly die, the bank would not have to bother taking ownership and selling your business to get back their money. Your life insurance policy benefits would settle the bank debt. Let’s look at other ways life insurance protects your business investments.
7 ways life insurance protects your business investment
1) Access to the cash value
As a business owner, there are times that you might face some challenges that will require extra cash. If you have complete life insurance coverage, you can borrow cash worth your accumulated cash value. Then use it to solve your problems such as paying overhead expenses, allowing your business to survive through specific economic periods, or adding extra cash flow to your business.
Read more: 7 ways small business insurance protects your company
2) Give extra protection to your main executives
It is normal for most of your executives to earn higher than other employees, their death benefit protection is also supposed to be higher. So, by giving your main employees extra life insurance benefits, you increase their protection and make them want to stay and put in more effort to grow your business. This way, life insurance protects your business investment by making your firm famous for recruiting and maintaining great talents.
3) Succession planning
For a business to grow strong, it is good it has a succession plan, and most times, a life insurance policy is always the bedrock of the succession plan. For instance, if your business has other partners, and uses life insurance policy as its major propeller for a buy-sell agreement, the death benefits will be used to purchase shares of a deceased partner. This is a great way to avoid conflicts between other partners and allow the business to operate without disturbance. If life insurance was used to fund a one-way buy-sell agreement, the appointed successor can use the life insurance policy’s accumulated cash value to purchase the company when the owner retires.
Read this: the different types of car insurance and their benefits
4) Gives executive bonus
As a business owner, you can help your main executives buy extra life insurance through an executive bonus scheme. Here’s how it works: the executive will be the one that owns the life insurance policy and also pay for the premiums. Then,the policy’s cash value can be used by the executive as a supplement for their retirement funds or for any other thing. If the executive is taken by sudden death, while still employed by you, the policy’s death benefits would be given to the family of the insured executive, without any income tax attached to it.
5)Key partner insurance
A vital person might be in your business that you do not want to lose. Because, the absence of such a person can ruin the existence of your entire business. But, with the use of life insurance, you can protect your business against the risk of losing a sensitive employee to unexpected death. For such a situation, the policy can be made to provide your business with a death benefit that equates expected revenue loss and administration costs required to find a worthy replacement. So, this is another great way life insurance protects your business investment.
6) Major employee retention
This is another amazing way life insurance protects your business investment. Use life insurance policy to help a major employee fund a postponed compensation program to give additional retirement benefits.
Here’s how it works: your company will be the owner of the executive’s policy. So, by the time the executive retires, your company will make use of the policy cash value to give supplemental retirement income to the employee. Although, if the executive dies before retirement, the proceeds would be paid to the company. In that case, the company can then use it to regain premiums paid and give a death benefit to the family of the deceased executive.
7) Estate equalization
For family-owned businesses, not all the family members participate in the business. This could be a problem and also affect the operation of the business, if it was meant to be shared between family members, irrespective of their commitment to the business. For a case like this, a life insurance policy can be used by you as part of your estate plan to give a death benefit to those members of your family that are not actively involved in the business or company. The death benefit can be worth the value of the company or business you left for those family members that are active and will succeed you. With this, life insurance protects your business investment, even when you are no more.
Every business investment needs protection, and one great way to do that is by purchasing life insurance. Apart from it giving your business protection in the event of sudden death, life insurance would also give your family or loved ones protection from paying your business expenses. Besides, with life insurance, your family can own and run your business when you are no more. If initially, you never saw a need to purchase life insurance, this article has shown you how life insurance protects your business investment. Therefore, hesitate no more in getting life insurance.