If you’re a business owner, you might not know that life insurance is an excellent tool for securing your business. Follow along as we discuss where (and why) to get the best term life insurance rates.
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If you own a business, you’re well aware of the financial needs of your company. You want to protect your investment—not just for the sake of your company—but for your family as well. If you would die unexpectedly, term life insurance can protect your family’s future and help secure the future of your business.
Why Business Owners Need the Best Term Life Insurance
It probably isn’t an exaggeration to say that your hard work is the life’s blood of your business: without your vision and commitment, your business couldn’t thrive (or even exist). The same is true when it comes to your family’s financial future—whether you’re the primary breadwinner or your partner has a career, your income supports your family’s daily needs and has a direct influence on their long-term quality of life. As a business owner, having a term life policy can also protect your family from the costs and liabilities associated with your business should you pass on. Here are just a few examples:
- Commercial debt secured by your assets. If you have personally-guaranteed business debt, then your family may receive less from your estate after you pass away.
- Legal fees connected to the transfer of business ownership. If a family member will inherit ownership of your business or will receive a lump sum payment from the business upon your death, associated legal costs may prove a burden to your family.
- Lost income as your business adjusts to your passing. It is not uncommon for the death of an owner to have a significant impact on the revenues of the business as ownership and/or management undergoes a major change. A term life policy will prevent your family from having to consider how to replace this lost income during their time of grief.
In addition to protecting your family, term life insurance can have a unique role in protecting the future of your business.
Here are three ways term life insurance supports your long-term business goals:
Term Life Insurance Can Help You Qualify for a Loan
Even business owners with excellent credit ratings may face challenges applying for a loan in uncertain financial times or simply based on the age and/or financial stability of their business. Nevertheless, having a financial “cushion” is as essential for the future success of your business as it is for your family. One way it may be easier to secure a business loan is to purchase a term life insurance policy that names your lender as the beneficiary. This process is called collateral assignment. It protects your estate in the event of your passing and it provides additional security for your lender.
A Term Life Policy Allows You to Plan for Ownership Succession
While many entrepreneurs are meticulous in planning their long-term growth strategy, some overlook the need to have a strategy to protect their business in the event of their death. This is fairly common—about 60% of business owners don’t have a succession plan detailing how they wish their company to be managed after they have passed on. A cross-purchase, buy-sell agreement is a simple way—despite its complicated sounding name—of making sure that if you pass away, the transition period for your business partners will be smoother. Under this model, business owners take out life insurance policies on each other that match the value of their shares in the business. These policies provide a payout that is meant to cover any loss of income or business value that the company may suffer when a partner dies.
Key Person Term Life Insurance Protects Business Income
Just like a cross-purchase, buy-sell agreement, key person term life insurance protects the financial security of your business in the event of an untimely death. Unlike the former, a key person doesn’t have to be a business owner, and it names the business, rather than a business partner, as the beneficiary. A key person could hold any position in your company that is essential to your businesses success. The policy payout from key person term life insurance will cover the loss of income during the search for a replacement for the key person and/or take care of the costs of a new hire.
» Learn more: The Best Term Life Insurance for Business Owners
Why Business Owners Need the Best Term Life Insurance Rates
As a business owner, your eye is always on the bottom line. While it’s smart to be thrifty when building your business, being budget-minded shouldn’t keep you from looking for the best term life insurance rates for your life insurance coverage.
Fortunately, term life insurance is affordable for most business owners (and families).
Combining term life insurance policies—that allow you to purchase multiple policies of different lengths (also called