Business Owners and Life Insurance

Business owners have different needs when it comes to taking out life insurance which differs from individuals who are employed. Life insurance is there to help look after loved ones, should the unthinkable happen. But if you own a business and die unexpectedly then you need a life insurance plan which will not only keep your family provided with an income, but also to ensure that the business can continue as usual. 

Which Type of Life Insurance Would Best Suit you as a Business Owner?
When taking out life insurance as a business owner there are some things which should be considered such as whether to take out term or permanent insurance. Term life insurance is a relatively simple idea – you decide on the level of cash payment which would be paid out upon the event of your death, and also on the term of the coverage e.g. $400,000 over 25 years. This can be a good way of making sure a mortgage balance would be repaid for instance.
This might also be a good type of life insurance for a business owner with a partner who is planning on retiring at a fixed date. For a couple running a business together they could agree that if either one dies before their planned retirement date, the partner left behind would be able to purchase their deceased partner’s share in the company. Term policies could be taken out making either partner the beneficiary.
This could be a good option to cover the business – but the problem with term insurance is that once the qualifying period runs out – say, after 20 years, then the company would no longer be covered. And, as the business gets older, so do the owners, which means taking out term insurance later on will be more costly. When term insurance ends without the policy owner having died, there will be no cash payment.

Would Permanent Life Insurance be a Better Option for Business Owners?
Permanent life insurance policies include both insurance as well as some investment, or ‘cash value’. The premiums pay, not only for your life insurance coverage, but some is used for investment purposes. The upside of this is that – when the term of the insurance ends, you will still have the investment element to call upon. Plus, permanent life insurance continues for the whole of a person’s life – and so may be more attractive to those wanting coverage for longer.
Plus an additional benefit to a business owner is that the investment component of the policy can be borrowed against and used to further the company – or the policy owner can use the funds to repay premiums.

Life Insurance for Key Employees
Life insurance can also be taken out by business owners on key employees to cover them in the event of their death – should that employee die the insurance would cover them for the loss of income entailed and help fund them in finding a replacement.
Life insurance for a business is often in place for buying out the remaining partners in the event of the premature death of one of the owners. The insurance can cover all the key members of the business. Before deciding which type of insurance to buy – business owners should get in touch with a financial advisor who can help identify the pros and cons of the various life insurance policies on offer.

Source: Karin Price Muewller at Entrepreneur.com

www.MintcoFinancial.com