Whether you're a current business owner or a budding entrepreneur with the next great idea, protecting your business is one of the most important steps you can take on your road to success. Most business owners would rather focus on their daily objectives than take valuable time away from their business to learn about insurance and succession plans. However, it’s important to make these plans because they help protect your finances, your retirement, your intellectual property, and your employees.
Learn the Basics
Did you know that life insurance can help protect your business? Whether you offer it to employees as part of a benefits package or insure a valuable business partner, life insurance helps your business meet and overcome financial challenges.
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- Reward Your Employees with Stock Options…and Life Insurance
- 5 Key Ways to Insure Your Home Business
A buy-sell agreement funded with life insurance can ensure a smooth transition when you’re ready to retire. For businesses with multiple partners, it can also protect your business if one of those partners becomes disabled or passes away.
Key Employee Life Insurance
Does your business’s success hinge on the performance of one or more key individuals? From star salespeople to top-tier chefs to visionary CEOs, they can all be insured and their contributions protected with life insurance.
Do You Need Business Life Insurance?
Life insurance can help business owners in many ways, but the three we’ll cover below are the most relevant for many clients:
- Key employee life insurance: does your business depend on one or more superstar employees?
- Business partner life insurance: what would happen to the business if you or your business partner passed away?
- Supplemental retirement income: are you putting away enough money for retirement, or are you spending it all on the business?
Protect Your Business with Key Employee Life Insurance
As we discovered during the pandemic, unforeseen events can shut down your business and be a disaster for the bottom line. Your business is particularly vulnerable if you have one or more key employees who bring in the bulk of your company’s revenue. Examples of key employees include:
- Salespeople who bring in the highest commissions or the best clients
- Engineers & coders who create and manage the software that keeps your company going
- Agents who manage your company’s biggest superstars (musicians, actors, writers, etc.)
- C-suite officers who manage the company’s new business, growth, etc.
If anything were to happen to one of these employees, your business’s profits would take an immediate hit. The cost of hiring a replacement, training them, and waiting for them to get up to speed could permanently damage your profitability. Key employee life insurance (also referred to as key person or key man insurance) can solve this problem.
How to Get Key Employee Insurance
- Step 1: Your company buys a life insurance policy on your key employee. The company makes the payments and is the owner of the policy.
- Step 2: Name the beneficiary as your company.
- Step 3: If your key employee passes away, your company gets the death benefit and can use it for any necessary business expenses, from recruiting to training to payroll. There are no exclusions or requirements.
Does your company have business life insurance in place? Give me a call for a free key person insurance quote.Schedule a Call
Protect Your Partnership with Life Insurance for Business Owners
If your business is a partnership, life insurance can help ensure the business carries on if anything were to happen to either partner. Let’s say you and your partner each have grown kids, but none of them are really interested in joining let alone taking over the business. What happens when one of you dies?
- Without business life insurance: If your business partner passed away, who would inherit their share of the company? Do his heirs know anything about the business or what their share might be worth? There are some awkward conversations that need to be had, but all these problems could have been dealt with earlier and solved with life insurance.
- With business life insurance: If your business partner passes away, the life insurance policy you (or your company) company owned on him would pay out to you (or the company). That’s the money you need to buy out his heirs. This ensures his heirs are fairly compensated, but also need have no future stake in the company.
See how much cleaner and easier the scenario with life insurance is? When you take the time to set up a corporate life insurance policy, it shows you’re serious about the future of your company. Whether a partner dying is a likely scenario or not, it’s one that could change the company forever – and one you should take action to control now, before it happens.
Is your priority protecting your business? If so, give me a call and let’s talk now.
How to Insure a Business Partner
- Step 1: Contact me to request a company valuation for the purpose of setting up a business life insurance policy on one or more business partners.
- Step 2: Insure those partners for the worth of their share of the business. Name the surviving partner(s) as beneficiary(ies).
- Step 3: If they pass away, the death benefit gets paid to the surviving partner(s) who can then use that cash to buy out the deceased partner’s heirs.
Life insurance helps you future-proof your business against a partner’s unexpected death. If that’s something your business needs, give me a call and let’s get to work.Schedule a Call to Discuss Business Life Insurance
Protect Your Retirement with Permanent Life Insurance
When you own your own business, it’s easy to put everything you have into that business. In the early stages, you may not take a salary – or you may take less of a salary than you would elsewhere. And saving for retirement? Forget about it…at least until the business is profitable enough to build that into your financial plan.
But it’s important not to ignore your retirement. Your future depends on it!
In general, you should plan on needing 75-85% of your pre-retirement income per year during retirement. The traditional way to get there is to sock away as much money as you can in a traditional retirement account, like a 401(k) or IRA. But did you know life insurance can also help provide a little extra retirement income?
The Benefit of Cash Value
Not all types of life insurance for companies are designed to protect the company itself – sometimes, it’s just as important to protect yourself. That’s the case with permanent life insurance.
Permanent life insurance comes with a cash value account, where a portion of every premium payment you make gets deposited. Depending on the type of policy you have, that cash value will grow at a certain rate. Insurance companies offer varying rates depending on the policy type you select.
Whole life, for example, grows at a slow but steady set rate of interest. Variable universal life, on the other hand, lets you invest your cash value for the chance at much faster, higher growth (with all the accompanying risk of any market investment).
That means permanent life insurance does double duty for you:
- Provides death benefit protection for your loved ones. When you pass away, your beneficiaries get paid.
- Provides supplemental retirement income in the form of cash value. Some insurance companies allow you to pass this accumulated cash value to your beneficiaries; others require that you spend it or it will revert to the insurer when you pass away. Either way, the longer you have that policy, the more cash value will accumulate. Some clients actually use this cash value to pay for their policy later in life, while others pull money out of it to help with retirement expenses.
How to Get Permanent Life Insurance
The good news? Getting started is fast and easy.
- Step 1: Get a quote. I can give you a quote over the phone or by email. You can also get a quote here on the website.
- Step 2: Apply. Part of the application process includes selecting a beneficiary(ies). You can always change these later, but you’ll have to include at least one beneficiary to submit your application.
- Step 3: Activate the policy. After the insurer has completed the underwriting process, they’ll decide whether to make you an offer for coverage and the price based on facts about your life and health. Accept the offer, make your first payment, and you’ll be covered.
Wondering how much coverage you need? Give me a call, let me ask you a few questions, and let’s go over your insurance options.Schedule a Call