Protect Your Business with Life Insurance
Updated: Oct 14, 2020
If you are reading this you are probably interested in how life insurance and living benefits will improve and protect your business. You’ve come to the right place. Below I will discuss in general terms how life insurance can be used to advance your business and create protection within your partnerships, as well as demonstrate how disability insurance both personally, and business owned are vital to your company.
If you are a business owner, you are responsible for the well being of your employees and your company. You take care of the finances, help your company grow, manage your employees, and do everything else in between. What would happen if you were to unexpectedly die, or become disabled and unable to return to work? Well, not a whole lot if you were prepared.
Being prepared means addressing the risks of being sidelined. 1 in 4 people will become disabled before retirement and can expect to be off the job for an average of 34 months. That is almost 3 years. Often this is not from snowboarding, or jumping out of airplanes. This is from heart disease, back problems, cancer and other issues that are likely to cause disabilities. Being protected is so important.
Here is how you can use life insurance for your business:
1. Tax free growth
- Depending on your policy, life insurance may provide access to cash that your
corporation could use at a later date if necessary.
2. Fund a buyout agreement
- An insurance payout from your corporately owned policy can help buy your
partners shares or vice versa when someone dies.
3. Protecting your key people in business
- Use the funds from your insurance policy if your key employee were to pass away
to help the business continue operations, train a suitable replacement, or
anything else that would maintain the level of success you had while your
employee/partner was still around.
4. Succession Planning
- Use your insurance policy payout as a transition plan when you want to sell your
business or pass it along to your family.
The four life insurance solutions above are often used in businesses, but what happens if a death doesn’t occur? What can you do if you become disabled? There are two options:
1. Individual disability coverage
2. Business overhead expense insurance
The first is owned personally, and the second is owned by your business.
Individual disability coverage is essentially income replacement insurance. This is an insurance solution that will pay out a monthly benefit of about 80% of your salary for the length of time you are disabled, or for the amount of time that your policy specifies. This coverage will allow you to pay for your rent, groceries, and everyday items that you would have spent your salary on.
Business overhead expense insurance is owned by your corporation. This insurance will reimburse your overhead expenses if you were unable to work due to a disability. This insurance will not pay you a salary but it will pay for your employees salary, your rent, your equipment, employee benefits, etc. This type of insurance saves businesses.
If you have a business, you should protect it with some type of life insurance or living benefit product. Every situation is complex, let's talk about it.