Venturing into business could be very challenging. Aside from monitoring the quality of the products or services that you offer, and keeping track of the sales, losses, and profits of your business, entrepreneurs are also responsible for the security of two important social socio-economic structures: your own family at home, and the organization you have at work.
This is the reason why having life insurance is important in case an inevitable incident or condition arises, rendering you incapable of providing for your family or leading your business to financial success.
Life insurance for business owners is essential for two reasons: the replacement of income production and the protection of the future of the business. If a business partner, owner, co-owner, or key employee is unexpectedly gone or could no longer fulfill his or her responsibilities to the company due to disability, a business could decline in a snap.
However, with a life insurance in place, the remaining members and partners could still keep the business running smoothly with enough capital while looking for a replacement for the departed partner, or buy out his or her heirs.
Although applying for a life insurance can be confusing and complicated, there are some insurance institutions like Big Lou Life Insurance that compares, assess, and help you get the appropriate life insurance unique for your needs.
As a businessman, it is highly recommended to consider all viable options in keeping the business running and standing even after you gone. Learn more on how having a life insurance safeguard your hard-earned investments, and benefit you in ways that will make you sign up for one right away!
It allows you to have a plan for your business’ future
There is a lot of unexpected factors that could happen when you run a business. However, a wise businessman is always prepared and has a back-up ready for any event that could be a problem for the business.
Among the projections you would want to consider, having a life insurance policy allows succession planning. As stated above, a business can use life insurance to provide sufficient funds for a buy or sell agreement in case an owner or a business partner passes away. This gives an opportunity for the surviving spouse and the other heirs to receive their rightful share, while the remaining business partners maintain the business running smoothly.
Also, key employees such as company managers, top salespersons, and outstanding staff members who are hard to replace are protected by what is called ‘key man’ policies that comes with a life insurance.
This policy allows key persons who are essential to the growth of the business to be provided with an additional income for his or her family in case of emergency.
Finally a life insurance provides estate equalization for a business owner’s children or heirs. A deceased business owner who has adult children with different degrees of involvement in the business can divide the estate equally by creating an additional asset that applies to a multi-generational balancing act.
You can provide your employees with good benefits
Having a good benefits program attracts new employees and maintaining current ones. Benefits such as health and disability insurance, and retirement plans appeal to most people looking for employment opportunities. With a life insurance, you can provide these and more to the most valuable people in your organization.
Most common plans for a health insurance are health maintenance organizations, preferred provider organizations, point of service, and indemnity plans. You can also offer your employees an access to a health savings account – a tax-free savings account for medical transactions.
You can also consider disability insurance for high risk employees. Disability insurance can be categorized into two types: short-term disability insurance and long-term disability insurance. Short-term disability insurance offers benefits, and it is usually payable for 26 weeks. On the other hand, long-term disability insurance benefits may last until retirement.
Dental and vision plans have also become popular options for company benefits. Although in most plans, orthodontics are not included, dental insurance generally covers cost of basic dental procedures such as clearing, x-rays, and fillings. As for vision plans, they include a yearly eye check-up, contribution on prescription eyewear cost, and glaucoma screening.
It helps you minimize your business’ tax
Another enticing benefit of life insurances is that it can allow a businessman to grow his company tax-free.
This is because accumulation of tax value can defer tax charges. However, life insurance can have greater tax benefits other than those accumulations. Loans and withdrawals are considered income distributions first, then as basis, for individual annuities.
Also, different from the annuity wherein remaining values become taxable after death, life insurance death proceeds are generally considered income tax free.
You can manage your business’ cash flow well
With a life insurance, you have the ability to borrow through cash value in case of emergency situations. More often than not, small-scale business owners or those operating at home assume that they do not need much emergency funds.
However, any business, regardless of its scale, is prone to several issues that could affect the cash flow in a negative way such as late-paying clients, product recall, or a loss of an important account.
Another way that life insurance can help cash flow management is that it improves the creditworthiness of a businessman and the corporation he is running. A policy’s cash value can be used as collateral to obtain loans at rates of your preference.
Money lenders usually prefer business loans that are repaid using operating profits. In addition, lending institutions see to it that their borrowers have back up assets in the event that the main source of cash flow falters. Cash value of a life insurance is an asset that can favor the approval of a loan application.
You can finance capital expenditures
Another bonus that a life insurance can give to businesses is that it can utilize loans to fund equipment, facilities, or other capital expenditures necessary in running the business. You will never have to worry about qualifying for a loan, credit scores, or excessive rate charges.
You can purchase from tractors, machines, new computer systems, and cash flow crunches using your life insurance cash value. This provides more liquidity and financial stability for both you and your business.
In the complicated world of business, even with the ones with a well-structured business outline, businesses could be faced with unexpected events that could impair its operations and financial stability. Without a backup plan or sufficient emergency funds, a struggling business would most likely shut down.
However, with a life insurance, it can provide you, your business, and your employees a secure financial foundation. It can also be used as a tool that could benefit your business’ image and valuation in many ways.
Indeed, organization and company owners can make the most of having a life insurance. By using it as a valuable benefit to attract employees, build loyalty among banks and other money lending institutions, it serves as a source of security for your family, the same way as safeguarding your business, providing enough capital for the continuation of the business you established in case an unfortunate event happens.