Any sole proprietor or small business owner who doesn’t have a life insurance policy is leaving both their business and family exposed to potential financial disaster.
I’m not being melodramatic because a life insurance policy just makes good practical sense.
Nobody plans on dying prematurely, but unfortunately it happens.
You just need to ask yourself this one basic question as honestly as you can – ‘What is going to happen to my family and my business if I were to die without a life insurance policy?’
Let’s break it down into 2 separate parts. First, we’ll take a look at how life insurance can be used to protect your family, and then we’ll examine the business side of things.
How Life Insurance Protects your Family
As a sole proprietor or small business owner with between 1 – 10 employees, you are most likely the primary breadwinner in your family. You work long, hard hours to build and keep your business running to bring in that income to support your family.
If you don’t have any life insurance, and something unforeseen happens and you were to die, then what is your family going to do without that income you were bringing in to support your family?
That’s right – it’s gone! The rent and the mortgage has to be paid. The utilities have to be paid as do your outstanding personal loans and credit card payments. And, sadly to say, don’t forget there could be medical bills and the funeral and burial expenses.
These expenses add up and do so quickly.
You might be gone but your surviving spouse and children still have to survive. It can be a dire time for them if you don’t have any life insurance.
The proceeds from a life insurance policy can take care of all their current and future financial needs for years if you plan carefully.
How a Small Business Owner Can Use Life Insurance to Protect their Family
Figuring out how much life insurance you need to protect your family depends on how much income you provide to support your family. Then, you have to look at all your outstanding debts and monthly bills. Next, you have to look down the road and consider what they will need to be able to manage financially. You might also want to factor in college tuition for the children.
The next step is to consider what assets you have on hand that are already available. This will help you determine how much you need for a policy.
Life Insurance for the Business
You’re not finished yet. You invested a lot of capital into your business. You may have business loans, equipment and could be financially obligated to suppliers and clients.
This could be a family business where there are other family members involved, or you could be in a partnership. If you are a sole proprietor or simply the sole owner with a few employees, then you should know that when you die the business has to be legally dissolved.
Without life insurance the business may have to be sold and this could be at a loss. The sale proceeds may be insufficient to cover the debts. And, let us not forget about federal and state taxes.
A life insurance policy needs to be in place to cover the disbursement or take over of the business efficiently and with minimal financial duress.
Types of Business Life Insurance
There are life insurance policies designed specifically for small business owners which can be of vital importance. Let’s look at them briefly.
Buy – Sell Agreement
This type of policy will ensure that if the business has to be sold it can be done so at market value and not as a distress sale which could result in a huge financial loss. A buy-sell agreement can also be used to facilitate the transfer of the business to another family member for an amount specified in the transfer.
If you have a business partner(s), you can also use a buy-sell agreement which allows the surviving partner(s) to purchase the outstanding shares or percentage of the business for a predetermined amount based on the market value or some other formula.
Buy-sell agreement business life insurance offers you a lot of flexibility as you can structure it to cover a broad variety of scenarios which you should discuss with your partners, family members and an independent insurance agent such as me to understand your particular needs.
Key Man Insurance
If you own a business with employees, one of these employees may be vital to the continuing success of your business. This could be a salesperson or someone who has a specialized skill or talent which is vital to keep the business running. If this person dies, they will have to be replaced which takes time to find the right person and get them up to speed.
In the meantime, you could end up losing customers or clients who are only interested in working or dealing with this person. This can cause a critical loss of business income which could ruin your business financially.
A Key Man insurance policy on this important employee or partner can lessen the financial impact on your business until a replacement is found.
If you own your own business, a life insurance policy can be vital to protect both your family and the business you worked so hard to build. Life insurance just makes good sense, doesn’t it?
Where to Find Life Insurance for Business Owners?
You always want to talk to an independent agent like myself. We can access and research dozens of companies so you are assured we will find the best policy at the most affordable rates. If you need life insurance for both your family and your business we can give you valuable advice and help you to find a policy that suits you.
Whatever your needs or questions then please call me direct at 877 – 966 – 9383.