Most people are driven to sign up for life insurance once they have a child. For entrepreneurs, your business is often your baby. As a business owner, whether or not you have children, you should consider getting life insurance for many of the same reasons people get life insurance to protect their family after they pass. Still, too many entrepreneurs still see it as an afterthought. Here are 4 reasons why life insurance is essential for all entrepreneurs.
It Protects Your Business
Life insurance payouts may allow your heirs to keep the business running after you’ve passed. That allows them to maintain the business, providing job security and stability for your employees. It also reduces the odds they have to sell the business to pay the bills. It may save your business by providing the money they need to pay someone else to run the business. Or the money may pay the bills while your intended successor is brought up to speed.
It Protects Your Family Whether or Not They Inherit the Business
If you pass, your family probably inherits your share of the business. Inheritance taxes may be owed. Proceeds from a life insurance policy will help them pay the tax bill without selling the business. Furthermore, it doesn’t force any co-owners of the business to go into debt to buy out your equity stake to keep the business going. The life insurance payout could give your family the ability to give one heir their share of the inherited estate in cash instead of having to sell the business to give heirs their fair share.
It Doesn’t Have to Cost a Lot
Around forty percent of entrepreneurs say they don’t see the value of life insurance. Some dismiss it as unnecessary, others think that the premiums are a waste of money. What they may not know is that there are a variety of life insurance policies you can choose from. Term life insurance policies are relatively cheap, though it is only in effect as long as you pay the premiums. If you pass, your heirs receive the payout or face value of the policy. At the end of the term, you either have to renew it or let it expire. Permanent insurance won’t expire. It has a savings component to it, whereas a term life policy has no value unless you pass.However, permanent insurance is complicated and can be expensive. You can end up saving simply by doing your research though. You could check out a site like Insurance Geek at insurancegeek.com for instance, and compare different quotes in seconds. You might just find out that life insurance isn’t as expensive as you thought.
It Can Benefit the Business in Other Ways
Commercial lenders want to know that your business loans will be repaid. You may be required to have life insurance to take out a large business loan. Others may favor you if you have insurance that ensures the debts are paid. Term life insurance policies large enough to repay the debt are generally sufficient for this. If you have a whole life insurance policy, the cash value of the policy could serve as collateral for a loan. If you pass, the collateralized amount is paid to the creditor and your family gets the rest of the payout. Life insurance allows us to protect our legacy. In the case of business owners, life insurance can support both your family and your business after you’re gone.
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