Business Life Insurance

As a business owner, you work very hard to build your business and make sure you are on top of every aspect. You dot all your “i’s” and cross all your “t’s” to ensure nothing goes wrong, then something happens to you! You are not able to take care of your business and all your hard work is going down the drain.

During all your preparations did you consider getting business life insurance?

Business life insurance will protect your family and your employees who would suffer immensely if your business folded. A business life insurance should always be a part of your business plans should you pass away or become disabled.

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About Business Life Insurance Plans
Using a Business Life Insurance Policy For Tax Purposes
The Different Types Of Business Life Insurance
Tips for Buying Business Life Insurance for Owners Or Essential Employees
Using Business Life Insurance As A Cash Management Tool
How To Find The Best Business Life Insurance

About Business Life Insurance Plans

When you have a life insurance plan for your business, you will ensure your business will continue to prosper and grow even after you are gone. Should something happen to one of your partners, there will still be a major impact on your business so you need to have proper coverage to make sure nothing negative happens. A good business life insurance policy will help your business in a variety of ways that you might not even think of but will be glad you have this critical coverage.

Think of business life insurance as something very much like personal life insurance. This insurance policy will protect the people who are extremely important to the well-being and prosperity of your business. It will protect your business from unexpected calamities or the death of a major executive who affects your business on a daily basis. Even though business life insurance cannot protect every single situation that might arise, it will provide the financial needs for your business. You will have to replace your valued employee and train them, this will cost a good deal of money. The financial security of a business life insurance policy will also help you obtain consultants, lawyers, and other services that might have to temporarily assist your business and make sure it continues to run properly.

You Are Responsible For The Health Of Your Business

Whether you are the owner of the business or a partner, you are responsible for the health and well-being of it. You must consider the needs of the business, the executives, employees, and the creditors with a business life insurance policy. If you have started your own business and are looking into business life insurance, give us a call! We can give you a plan that will work for you, your employees, and your business partners.

Using a Business Life Insurance Policy For Tax Purposes

If you need to use your business life insurance for tax purposes, you must plan accordingly to prevent future consequences that could decide whether your business will continue to grow or fail. Some of these tax purposes will probably include the following:

• Ensuring the well-being of an employee.
• Funding buy-sell agreements.
• Providing for an employee’s benefit.
• To guarantee a business loan.

The Different Types Of Business Life Insurance

There are several different types of life insurance to help your business.

Buy-Sell Agreement

This is a contract which will guarantee the life of your business. Should you pass away, your interests in the business are transferred, at a previously determined price, through this agreement. This agreement provides that the other partners or owners are obligated to purchase your business interest and your heirs are obligated to sell in order to make sure they do not take ownership of the business, This is especially important if they do not have the skills or the desire to run the business.

Another scenario would be if your business partner passes away, their shares in the business would go to their spouse. This could leave you in a position of dealing with your partner’s spouse. In order to prevent this from happening, the buy-sell agreement should have in place that a partner and his or her beneficiaries agree that in case of their passing away, the spouse is required to sell their shares back to the other partners in the business at a fair and reasonable amount.

The money used to purchase the business is usually provided through life insurance. Should a partner die, the life insurance proceeds are paid by the insurer to the remaining partners. In turn, they give the money to the deceased partner’s spouse in return for their shares. This can be a complicated process and should be handled by a skilled attorney and accountant.

Term Life Insurance is an inexpensive way to get a buy-sell agreement!

Key Man Life Insurance

Key man insurance gives the business cash if one of the owners, a highly skilled employee, or an employee who produces revenue were to pass away or become unexpectedly disabled.

If an owner or valued employee were to die, your business will need cash to cover the expenses for finding and training a new member of your business. Your business must continue with development programs that could possibly be in harm’s way due to the death of this person. It will also assure that creditors and customers of your business will continue to be a part of the business.

Expenses can add up very quickly and without a good life insurance policy to provide cash, the separation between the employee who died and the replacement process can seriously injure a business, especially a small business.

Also known as Key Man Life Insurance, this insurance gives a business the money they need to get through the death of a key individual. This money is normally used to recruit and train a replacement employee or partner. Think of it this way, what if your leading salesperson was to pass away and his customers decided to leave and go to another company? Another scenario, if your most valued manager, who is loved by all your workers and customers, passes away you will potentially lose employees and customers.

If you have a term life insurance policy for your valued employee and they pass away, this is a really simple way to protect your business.

Individual Life Insurance

This policy is provided to cover a business owner and his or her family against a distressed sale. It is quite common that business owners will take out personal assets and use them as collateral to secure a business loan. Should the owner pass away, their surviving family members will probably sell the business to cover any debts that have incurred.

An individual life insurance policy should have an amount equal to any obligations and protects your family from selling your business for less than its actual worth because they are desperate for cash!

Qualified Retirement Plans

Using life insurance as a death benefit for your employees is a really good idea but you can also fund your business’s qualified retirement plan as well. There are some legal limits that apply and according to the kind of plan either defined contribution or defined benefit. By using life insurance with a qualified plan will combine benefits for both while providing unique advantages for your employees and yourself.

Tips for Buying Business Life Insurance for Owners Or Essential Employees

There are several things you should do before purchasing any type of business life insurance.

1. Decide Who is Critical for Your Business

You must decide what business partners and/or employees are critical to the overall success of your business. You have to consider the revenues that a particular employee has generated and if their loss would threaten your business’s financial well-being, at least for a short period of time.

2. Decide How Much They are Worth to the Business

If you are considering getting life insurance for a business partner or an essential employee there are some factors you should know. Consider your company’s profits which would decline should this person pass away or become disabled. Know how much it will cost you to replace this employee and train them. Once you have a good idea, it will be much easier to find the right life insurance policy for your needs.

3. Compare Business Life Insurance Quotes

You should start by getting quotes from several different insurance companies. Know the price of the policy and their specifications and features. Once you have gone over the different policies, decide which offers the best life insurance, the cost of the policy, and whether it works with your budget. You should also find out if you are eligible for any tax deductions on your premium payments for the Key Person Life Insurance Policy.

You should clearly understand any financial consequences that might arise from insuring one employee. You need to sit down with a professional to find out if you meet their criteria.

Using Business Life Insurance As A Cash Management Tool

Outside of using life insurance for the loss of an essential employee or helping you fund your buy-sell agreement, life insurance can play a major role in your business as a cash management tool. A business wants to make sure they can cover their benefits programs and a great strategy for that is investing in life insurance.

Figuring out cash payments can be difficult to determine and can be rather expensive. It can happen when a business least expects it and being able to afford the loss of an essential employee and paying out their benefits can be a challenge. If a business buys permanent life insurance for a group of employees, they can start funding these future obligations, tax-deferred.

How To Find The Best Business Life Insurance

Before purchasing anything, always speak with a professional for advice. A highly-skilled, professional life insurance agent or a business consultant will help you decide what your business needs and then give you the pros and cons of different business life insurance policies. Work with a financial advisor, that you trust, so they can look at your insurance needs regarding your complete financial plan and those of your business.