When you think about life insurance you probably think about life insurance to cover your debt, income, children’s education, or funeral costs. However there is another aspect to life insurance that most people do not consider, that is how life insurance comes into play as a business owner and why it is so important for business owners to have life insurance.
Whether you built your business from the ground up or inherited it from previous generations, you work hard to maintain the dream that is your business. You likely have employees, family members, and possibly business partners who depend on you. You may have debt in relation to the business or assets that the business owns. No matter what the situation, if you own your own business, you likely pour your heart and soul into it. Now imagine, you pass away and didn’t have adequate protection or plans in place. Now those family members or business partners are looking at paying back that debt, handling those assets, figuring out what to do with those employees. They could be forced to help run the business during this stressful time or worse, to sell the business.
A personal life insurance policy could help to protect your family to pay off the debt in relation to the business and to cover any loss of income in relation to your passing that they may have previously relied on for daily expenses and bills. You can also combine life insurance policies with a buy-sell agreement with your partner(s). The agreement would ensure that in the event of a death of a partner, the remaining partner could buy out the surviving family’s share at a previously agreed price and the life insurance would pay for the buyout. This protects the remaining partner from being put into an unexpected situation. For example, if you pass away your partner is now in business with your spouse. Say that spouse were to remarry, now your partner is in business with your spouse and their new partner. If your spouse were to pass, this would leave your partner in business with the new partner. It could get very uncomfortable or become a bad situation fast. By having a buy-sell agreement you prevent this from happening.
Now switch gears, what if you don’t pass but one of your employees does. You are probably thinking, well they would have their own life insurance and that would protect their family. This could be true, but it wouldn’t protect the loss of earnings or the dent in the operation that losing a key employee causes. This is where key person insurance would come into play. Key person insurance helps to protect against the loss of a critically important employee. In the event of a loss, the insurance would pay the owner(s) of the business. In some cases it can also be used in the event the key person becomes incapacitated by a disability or medical issue. This can be used to help offset the loss of earnings from losing this employee as well as cushion the blow of having to replace that employee.
Life insurance can help to protect your family from having to be responsible for the debt you leave behind in addition to helping to cover income loss in relation to everyday expenses and bills. A buy-sell agreement can help to protect your business partner(s) in the event you pass by providing a buy out option and listing a line of succession. Key person insurance can help to cover the losses a business will feel when a key employee passes away. All of these things can ensure that your business is protected and remains running. Talk to your local agent today and get protection for your business.