Before Jumping onto the ways, let’s take a look at what term Life insurance is actually. So, life insurance is an agreement that if you die, or are diagnosed with a terminal illness, a sum of money will be paid out to (typically) your spouse or children. You can also have this death benefit paid to other members of your family (i.e. parents, siblings, etc).
As a small business owner or partner, you might be wondering what would happen to your business if something happened to you. How would your family cope with the loss of income? What about your employees and their families? What happens when a business has debt backed by assets such as the family home?
You’ve probably planned some of these questions out, but before you take that leap of faith, take a look at these common myths and consider checking the reality.
If I die, my spouse can run the business.
Reality Control: In many cases, the spouse is unwilling and unable to manage the business. Small businesses often depend on the marketing, technical or managerial skills of the owner. away and the business may fail.
A competitor will buy the business.
Reality Control: It is possible, but it may not be in the best interests of the surviving family. Competitors may try to drive customers away from the business, buy cheap equipment and inventory, or buy the business cheaply.
My death or the death of my partner will not affect the business financially.
Reality Check: Each small business owner usually makes a very specific and significant contribution to the business or has a particular skill that is difficult to replace.
A key employee can run the business.
Reality check: Maybe yes, but if the employee is really running the business, they may need a salary commensurate with the additional needs of the job. The funds needed to keep everything running is the amount needed that the business can support.
Also, there are types of life insurance that deals with different life span and time. These insurance provide large facilities to their customers throughout their whole life insurance.
Three important ways that life insurance can protect your small business
Key person insurance.
This is a life insurance policy written by the company on the life of a key employee and payable to the company. When a key person dies, insurance can help recover lost sales or revenue and cover the costs of finding and training a replacement.
A contract of sale financed by life insurance.
This allows other business owners to purchase a deceased owner’s stake in the business at a pre-agreed price, ensuring that surviving family members are fairly and promptly compensated for their share of the business.
Individual life insurance.
A policy that you own individually can provide your family with extra money to pay personal debts, cover living expenses, and finance future needs like college or retirement.