Family members, business partners, and your employees can all suffer an additional financial loss in the event of your death without protections in place. Preparing your business, employees, and family members for such a tragic event can be difficult, but it can be done with life insurance.
You should always prepare for the worst. The right life insurance can help secure the future of your company, cover your employees, and protect your family.
Why Should a Small Business Owner Consider Getting Life Insurance?
After working hard to grow the business, your death can quickly unravel all that hard work and cause plenty of problems.
Your family members may not be able to fill your role, or there may not be an immediate replacement ready. Uncertain business partners may discontinue relationships. Loyal employees may miss paychecks or face unemployment. Alongside all of this, the business could take considerable financial losses in your absence.
Life insurance adds a degree of certainty in the face of all these issues. It can help mitigate financial burdens and protect everyone involved with the business by providing the funds to pay off business debt, maintain operations, and keep employees covered. Here are a few pros and cons for and against life insurance.
Pros vs. Cons
The primary cons to life insurance is the cost. Small businesses owners dealing with limited working capital may not want a life insurance policy. They may view it as a financial burden. This is particularly true if you need more than one policy.
However, there are far more benefits to consider. For family members, a life insurance policy provides the financial means to cover mortgage payments, other debts, and basic living expenses. This can be instrumental for a family who previously depended on a successful business to provide income.
For the business, a life insurance policy can keep it up and running with financial support. It can provide working capital and secure employee paychecks. A policy may also help pay off outstanding debts. All of this helps smooth over the transition, and it provides security for all involved with the business.
What Types of Life Insurance Should You Consider
If you have family members, business partners, and employees that rely on you, you should consider a life insurance policy. In order to determine the best policy, it's important to understand your life insurance options and how they can provide your business and family.
Broadly speaking, there are two types of life insurance to consider: personal life insurance and business life insurance.
Personal Life Insurance
Personal life insurance policies are designed to support immediate family and dependents. They can help smooth a transition if a family member is taking over, but they may not provide direct coverage for business. Typically, individuals can choose between the term life insurance and whole life insurance.
Term life insurance policies have a definitive start date, end date, and coverage amount. For example, you could opt for a $500,000 policy over a twenty years period. When the policy term ends, beneficiaries are no longer covered in the event of the policyholder's death. This type of policy is more economical and popular among individuals looking for insurance. It allows the policyholder to make a flexible plan for coverage, and it’s less of a commitment financially.
Whole life insurance policies provide protection for the duration of an individual's life, not just a limited time period. In addition, these policies also typically include an investment component which allows policyholders to earn interest on their payments. As such, beneficiaries typically receive the funds from the original policy as well as any accrued interest. Whole life policies can provide solid financial benefits and returns for the beneficiaries, but they are also more expensive. This type of policy is also less flexible compared to term life options.
Business Life Insurance
While personal policies can help, there are other policies specifically designed to protect businesses. If you are worried about both your family and business you may want to consider business life insurance policies. Key personal insurance is popular way to cover a business.
Key Person Insurance Policies are taken out against a “key” employee, typically a business owner or partner. It covers death-related financial losses that a business may suffer in the absence of a primary employee. It can help pay outstanding debts if a business closes. A key person policy should also provide time and financial resources as a company regroups and searches for a replacement. If you are interested in learning more or obtaining a Key Person life insurance policy, you will need to speak with one of LeapLife’s life insurance specialists as it is not a product we offer online. Our team is available Monday through Friday and can be reached at (844) 755-5327.
To protect your business and family with term life insurance, start by getting a no-hassle life insurance match here.