Most people buy life insurance to protect their loved ones from financial hardship. Business owners, on the other hand, must consider other aspects of life insurance. Being prepared in the event of your premature death will provide future financial support for those involved in your business.
How Can Life Insurance Protect Business Owners?
When you shop for life insurance, your family should be your number one priority. Being a business owner, however, your family relies on your business’ revenue to survive. Without this income, your family would struggle to pay the pills and stay afloat. When it comes to your actual business, however, life insurance can have huge implications:
- Your employees rely on your business to survive. Without you running things, your business might struggle to pay the salaries of employed workers, thus driving them to seek employment elsewhere. As a business owner, your life insurance benefit should be enough to take care of payroll for at least a year while your company recovers from your death.
- Most businesses constantly look for growth opportunities so that they can remain profitable in the future. When buying a life insurance policy, make sure to choose a death benefit large enough to factor in these costs (growth opportunities) so that your company can continue to grow without you.
- Likewise, business debt is necessary when it comes to running a company. As you continue to do business, you often times accrue debt (either to expand or sustain). If you pass away prematurely, your business partners or family members may struggle to manage this debt. Because of this, it’s vital to choose a life insurance policy large enough to cover the debts of your business.
- If you die, your company will need to replace your position in the company. This requires recruiting and training. In addition, your company will want to accommodate the replacement with a competitive salary. These things can be expensive, which is why you should make sure your life insurance policy is big enough.
What To Look For In Life Insurance For Business Owners
When you shop for life insurance quotes, you will likely base your death benefit on anticipated costs that your family or business partners will incur after your death. Most likely, you will determine these costs based on the current position of your business. In other words, you will probably select your death benefit based on how your business would be affected if you died shortly after initiating coverage.
Prepare For Business Growth
It is important, though, to review your life insurance coverage periodically to ensure that your coverage still meets your needs. As your business grows, you will likely hire additional managers, advisers, and employees. You will probably incur additional debt to facilitate business growth. Also, your value to the company will increase significantly as your business takes advantage of new opportunities and captures additional market share. All of these factors mean that your life insurance death benefit should increase as your business grows.
It is appropriate to review your policy annually to ensure that it provides adequate coverage to protect your business partners, family members, and employees. This allows you to make the necessary adjustments to account for changes to your business, which minimizes the risk that your death benefit will not adequately sustain company operations.
Business growth may also create the need for life insurance coverage for partners or key management members. If a partner or executive dies, your business could struggle to remain viable until you find and hire a replacement. For this reason, it is important to consider purchasing life insurance coverage for these individuals. Although it can be difficult to estimate what a partner or executive’s death would cost your business, taking the time to determine this cost can help minimize the impact of a key person’s death on your company operations.
Final Word On Business Life Insurance
Business owner life insurance premiums represent an additional cost that might seem difficult to assume on top of other business expenses; however, the amount you pay in premiums can make the difference between the success and failure of your company. To start looking for an affordable life insurance policy for you and your business, enter your zip code above. Life Ant will connect you, a business owner, to some of the most competitive life insurance rates in the industry.