Being a business owner comes with its share of challenges that you have to navigate on your own. One of the things that you may have recently discovered is that as a business owner, you need life insurance. One of the reaons is that you dont get the perks of group coverage offered to those who have a typical job. On the flipside, there are also a ton of benefits that life insurane can provide for you that can aid your businsses and help you acvert potential disaster.
Reasons You Need Life Insurance When You Own a Business
Everyone needs some type of life insurance. For now, we’re going to take a look at why it’s so important for business owners to have life insurance. There are many benefits to it. We will also explore the different ways that business owners can get life insurance.
SBA is the acronym for the Small Business Administration. With the SBA and your life insurance, you are able to take advantage of SBA loans. These loans are long-term and somewhat guaranteed by the government. The government gives these loans as a way to encourage the growth of small businesses.
These loans can be used for a variety of general business needs, from equipment to inventory. There are several options for SBA loans. These loans are pretty flexible and often offer low-interest rates.
As you grow and develop your business, having low-interest rates and flexible spending options is essential. This will help you to truly expand your business and its reach. SBA loans are a great way to get things started in the beginning. You can also use them later on when your business is growing larger.
Having life insurance is essential to getting an SBA loan in the case of the business owner’s death. With life insurance, you can take advantage of the benefits of SBA loans for your business. If you don’t have life insurance, you won’t be able to receive the benefits of SBA loans for your business.
Another option you have with life insurance as a business owner is a collateral assignment. With a collateral assignment, an assigned lender is given a set portion of the claims if the death of the life insurance policy holder occurs. This means that the life insurance is used as collateral.
The main reason that business owners choose to use this is so that they can get funding. This business funding is usually what they wouldn’t be able to get without a collateral assignment.
To do this, you need to access the collateral assignment of a life insurance policy forms from your insurance company. These are often posted on their website and are easy to fill out. This is a fairly common process, so your insurance agent should also be able to help you out with it.
You will need to make sure that your policy and the insurance company is assignable. Without this, you will not be able to use a collateral assignment.
Now, one minor problem with collateral assignments is that they can’t be used with term life insurance. Whole life insurance does work with collateral assignments. This is because whole life insurance has a cash value. With the collateral assignment, you can borrow up to the cash value of your policy on your loan.
What can be confusing is that some companies will require you to get term life insurance in order to get the loan. You will need whole life insurance in order to get a collateral assignment set up.
Key Employee/Key Person Coverage
With life insurance, your business can also be protected in case a key employee passes away. This is similar to a collateral assignment in some ways.
When you use key employee coverage, you are guaranteeing that you can find a replacement in the case of death. Without life insurance, the process can be long and drawn-out. You can save a lot of time and money by using key employee coverage. This helps to keep your business running smoothly and keeps you on track.
You should evaluate your business and find the most important employees. These would be the ones that you need to cover under the life insurance policy. Think about the employees who might make the most significant changes in your business or who come up with the most ideas.
If your business can’t be successful without them, they are the key employee. This is a good way to build a stronger connection with your employees too.
This coverage is also a useful asset for gaining credibility, which comes in handy for commercial borrowing and other business transactions.
If the profits from your business are what you use to provide for your family, you need to have life insurance. This will help your family to stay afloat in case anything would happen to you. Life insurance also ensures the rest of your family.
You should make life insurance an important part of your life if you have a family. This will be an essential part of keeping you and your family protected. Knowing that you have that protection should put you at ease.
Keep in mind that you really only need term life insurance. If you have small children at home, you should look for a 20-year term policy. If you would pass away during that term, your family would receive the money that they need to supplement your income from the business.
After that term is over, your kids may not be living at home and will not need the money when you pass away.
Secure Funding (Venture Capital)
Venture capital funds are very important to a business. This funding helps you to do what you truly want to do with the business. Of course, a lot of money is in your hands and that can be scary.
In order to put yourself at ease as you continue to work on your business, you should find a way to protect the money.
Life insurance is a great place to start. Once you have a life insurance policy in place, you can set up the protection for the venture capital money.
In the same way that you want to protect your employees, you also need to protect the funding. After all, you need this money to create and grow your business. If you lose it, you will be stuck without a strong business and you will owe money back to the lender.
To protect the venture capital money, you should use a life insurance policy on a key employee in your business. The purpose of this is to protect what that employee has done for your business. Plus, the investment will remain safe. The main reason for this protection is necessary is that there is a chance of the key employee passing away when the business is in the payback phase.
It’s best to begin protecting the venture capital funding as soon as you receive it. You don’t want to be caught without that plan in place.
Consider Your Options
When you are shopping for life insurance, you will most often be presented with two different options—term life and whole life. You will hear mixed opinions about each one, but most people recommend term life insurance.
The best choice is term life insurance because it will give you exactly what you need for a reasonable price. You won’t be overspending for benefits that you won’t even end up using.
With term life insurance, you purchase a specific number of years at a time. For example, you might buy a 10-year term of life insurance. You only buy the amount of time that you need. If you have kids at home, you can get a 15-year term policy, assuming the kids will be moved out by then.
Whole life insurance is much more expensive and lasts a lifetime. This isn’t necessary in most cases. It’s also much more complicated than term life. It can be confusing to know exactly what you’re getting with whole life.
The price difference alone is one major determining point for people when they choose life insurance. Since term life insurance is less expensive, it usually makes more sense on the surface. As you continue to investigate your life insurance options, you will see that term life really is your best bet.
It’s a good idea to ask your insurance agent for more information about each policy that they can offer you. Each one has different conditions and limitations. You should be aware of all of your options and any “catches” before signing the final paperwork.
Why You Should Choose Term Life Insurance as a Business Owner
Since whole life insurance is so expensive, you should make sure you purchase term life insurance. Whole life insurance simply isn’t worth it.
In the case of your business, it’s especially important to select term life insurance. The reason for this is that you really only need what term life has to offer.
Additionally, you need to be saving up and investing your money so that your business can continue to expand. If you’re throwing away tons of money on whole life insurance, you won’t be able to save up to grow your business.
If your business is a top priority, you will want to see it grow. Term life insurance gives you the financial freedom to do this. Investing the extra money you would be spending on whole life insurance is a great place to start.
Another important consideration to make is how long you plan to keep the business for. Some business owners only want to run a business for a limited time, such as five years. If this is the case, you can get term life insurance. This coverage would last for the five years (or however long you want to keep the business for).
If you would buy whole life insurance in this situation, you would be stuck with it for your entire life. It’s a good idea to stick to term life so that you can get what you need when you actually need it. Then, you can save money to grow your business.
How to Get Life Insurance as a Business Owner
One of the best ways to get life insurance is to use an independent life insurance agent. The purpose of this is to see several options without feeling persuaded into buying one.
A common problem with insurance agents is that they work directly for a company. Instead of telling you about the policies and showing you all of your options, they try to sell you their company’s insurance.
As you can probably imagine, this means that you don’t have much of a choice about the life insurance you get.
With an independent life insurance agent, you will get to see a large selection of life insurance policies with absolutely no pressure to choose one over the other. The independent life insurance agent should give you some guidance and help you to make the right choice without any bias.
When you work with an independent life insurance agent, you don’t have to spend extra money. They also aren’t working directly with any of the insurance companies that you might select, so there is no incentive for them to sell one over another.
This also saves you time and energy since the agent will be doing the shopping for you. They will then show you the best options that they found.
If you have intentions use your life insurance for business-related coverage and perks, be sure to disclose this to the agent. They can help you to understand how the process works. Plus, they may be able to guide you toward a better policy for your particular needs.
Though almost all policies will work with the business perks listed above, it’s always best to double check. You don’t want to end up with the wrong policy and not be able to run the business how you were planning to.
As you can see, there are many reasons why a business owner should make sure that they have life insurance. Without it, they will be missing out on all these benefits. Additionally, they will be putting themselves and their family in danger. It’s best to get term life insurance to protect yourself your family, and your business.
If you have life insurance and aren’t using it for any of the benefits listed above, I strongly recommend doing so. Sit down and talk to your insurance agent to get more information regarding your specific policy. There is a lot that you can do with your life insurance, so make sure you aren’t missing out.
The good news for you is we can help you navigate the rough waters and get the best coverage at the best rate. We specialize in providing life insurance to business owners, at no extra cost to you! You can use our life insurance quote engine or give us a call today!