Everyone needs to have life insurance. But when you’re a business owner, life insurance needs are much more specific. You may find that you need to have several policies, each designed for a very specific purpose. By working with an individual agent, we will be able to help you obtain quotes from the top life insurance companies, such as Banner Life, for all different types of policies.
Nobody wants to think about anything tragic happening to them, but it’s important that you have plans in place to ensure that both your loved ones and your business will be able to recover from the loss.
This post is going to look at the different types of plans and the ways that you can get affordable life insurance protection.
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Life Insurance for All of the Usual Reasons
This is the basic life insurance coverage that you need to protect and provide for your family in the event of your death. Though you will ultimately have to settle on a certain fixed amount of coverage, it helps to know what your family’s specific needs will be when you are no longer around to provide for them.
Here are some of the more basic possibilities:
- Sufficient funds to pay for final expenses
- Funds to cover lingering medical expenses (there are always deductibles and co-insurance provisions and sometimes even disallowed medical expenses)
- Enough money to cover your family’s living expenses for at least the first few years after your death
- Funds to help provide for college for your children
- Funds to pay off major debts, like student loans or a mortgage
These are the kinds of expenses that life insurance is designed to help you with, whether you are self-employed or salaried. For most households, I recommend just getting a cheap term life insurance policy for at least ten times your annual income, and this will provide what most people need. But when you’re self-employed, there are other types of life insurance coverage that need to be considered.
Covering Business-Related Debts and Obligations
If you run your own business, it’s likely that you have certain debts and other obligations related to the business. Even if the business ends upon your death, there may be obligations that will still need to be paid even though the business no longer exists to pay them.
This can include debts that were incurred to create, grow, or maintain your business. It can include credit lines, car loans, or even a mortgage on business property. Beyond formal loans, there may be other obligations that will need to be covered as well. These can include accounts payable balances, income- and sales-tax obligations, and the remaining term on unexpired leases.
Even though you will be gone and your business will be closed, these obligations will generally survive the business. If they cannot be paid out of business income or assets, they will need to be paid out of personal assets, which means any assets that your family has.
Not having enough life insurance is one of the worst mistakes that you could ever make for your loved ones. If your plan is too small, then your family is going to be stuck with leftover bills and unpaid expenses. Before you purchase life insurance, make sure that you calculate how much coverage your family will need if something were to happen.
A Policy to Enable Your Business Partners to Buy Out Your Share
This kind of life insurance policy is common in partnerships and small corporations. In such business formations, each owner’s contribution to the business is so significant that the death of that person could cause the collapse of the business.
All the partners or owners in the business should maintain a policy on one another that would pay proceeds to the surviving parties in the event of the death of one. It’s the kind of life insurance policy that will serve three very important purposes:
- It will enable the surviving owners to buy out the share of the deceased owner, transferring full control over to the surviving owners.
- It can also provide an infusion of capital that will enable the surviving owners to adjust to the loss of the deceased partner.
- The proceeds of the policy that will be paid to buy out the deceased owner’s share will be paid to his or her family and represent additional funds for the deceased owner’s loved ones.
This type of life insurance will be a business expense and is absolutely essential for any enterprise that has two or more owners. Not having such a policy could result in the surviving owners losing the business entirely.
“Key Man” Life Insurance
This kind of life insurance is not the type you carry on yourself as a business owner, but rather one you take out on the lives of employees who were key players in your business, as the term “key man” implies. This is the kind of employee who, were he or she to die, their loss would cause financial hardship for your business. Under extreme circumstances, it could even result in your being forced to go out of business.
A key man policy could be taken on the life of anyone who works for you that your business can’t do without. This can include the general manager, a top salesperson, or a person who has very important industry contacts. It can also be taken on an important production person, a master mechanic, or an IT person who is a major player in your business.
The proceeds of this policy would provide you with the funds necessary not only to replace that person following their death but also to cover business losses that may happen as a result of their loss.
As you can see, business owners need to look a lot deeper at their life insurance needs than salaried people do. There are a whole bunch of obligations in a self-employed person’s life that other people don’t have. If you are a business owner, you should meet with an insurance broker to fully review your life insurance needs.
If you’re like most business owners, life insurance is one of the last things on your mind. It’s quick and easy to get life insurance, and you shouldn’t put it off any longer. With some life insurance plans, you’ll get approved for coverage in a matter of days.
Bottom Line
If you’re a business owner, you know how important the bottom line is. If you’re a small business owner, you probably don’t have money to waste. Luckily, there are several options for affordable life insurance. Not having insurance coverage could leave your family with a massive amount of money or cause your business to go under. You never know what’s going to happen tomorrow, which means that you shouldn’t wait any longer to get the coverage that your family deserves.
When you apply for life insurance, regardless of which type of plan you choose, there are a couple of ways that you can secure lower rates from the insurance company.
One way is to cut out any tobacco that you currently use. If you’re a smoker and you’re looking for life insurance coverage, then you should expect drastically higher rates for your life insurance coverage. Smokers are going to pay twice as much for their life insurance versus what non-smokers are going to pay for the same-sized plan.
Every insurance company is different, and all of them are going to view your application differently. If you want to ensure that you’re getting the best rates, you’ll need to find a company that’s going to offer you the lowest rates.
There are hundreds of companies on the market, and all of them have different medical underwriting or rating systems that they use. The rates that you get are going to vary drastically depending on the company that you use.
Because there are so many companies on the market, you could spend hours calling different companies or agents. Instead of wasting your precious time, contact an independent broker to do all of that hard work for you.
