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Why Entrepreneurs should have Life Insurance
Now, that you have taken the necessary measures to start your business, it is vital that you have the right resources in place to cover you and your family in case of an emergency. Let’s face it, no one really wants to think of the inevitable or an unforeseen event occurring that can lead to injury, disability, let alone death, but a good business person knows you should always anticipate the worse and be prepared to deal with it. If you are blogging full time you may not see blogging as a risky profession but in the words of Benjamin Franklin, ” if you fail to plan you plan to fail.” No one like to think about the unexpected but anticipating all possible outcomes whether good or bad can offset your family as well as your business. In this post, we will take a look at important insurance policies every entrepreneur should consider possessing in order to reduce exposure to what can be a costly situation in the long run.
Protect Your Business
From a personal perspective, owning life insurance has been a smart decision not only for our family but also for our businesses as it protects your company from financial loss, liabilities and instability in case of an untimely death. It can also assist in the maintenance of your business during tumultuous times, by providing short-term cash flow, and allowing you to keep your business operating and open in order to satisfy your suppliers and customers. With three kids, it gives us peace of mind, knowing should the worst ever happen to us our business we built as long as our legacy will be protected.
Protect Your Loved Ones
As part of any contingency plan, if you haven’t already thought about it you are going to need to protect your loved ones when income stops arriving and if a devastating events occur, we can see from current news this year’s hurricane season has truly taken a toll on our country. With so many people affected and displaced. It should have you wondering do you have the correct plan as well as enough insurance in place?
Why Entrepreneurs Neglect Life Insurance?
There are various reasons as to why many entrepreneurs don’t see the priority in obtaining adequate insurance, as finance are typically stretch to capacity in the beginning, it’s easy to neglect why having insurance is not important with a never-ending to-do list. We have to be realistic, we all are busy but you have to be honest what challenges would your company faced should anything happen to you?
The best way to answer this question is to do your own research and truly understand how insurance can works for you. Based upon your business needs, entrepreneurs can accurately incorporate vital components into their insurance plan, which can include buy/sell, point person, life, disability as well as property and casualty clauses to help establish and maintain a safe and secure business. Be armed with this information, when deciding how much insurance you really need?
When purchasing life insurance there are things you need to consider when purchasing life insurance?
Types of Insurance
There are two basic kinds of life insurance policies: term and permanent.
Term life insurance
his option is the simplest and straightforward. You pay a premium on a monthly or annual basis and your family is protected for that term, usually 10, 20 or 30 years. This policy can assist with a family loss of income, short-term debt and additional protection to help during child raising years and college education. You can think of this policy as how much money your heirs would be paid when you die — and a “term” of how long you want the coverage to stay in place. For example, you might choose a $500,000 policy for a 20-year term. Considering, as most people don’t start off with anything, you are providing your loved ones with a way to survive and prosper in your absence.
The downside to term is that it’s only good for the specific length of time. It is inexpensive for individuals who are young as it is only renewable to age 70. If you plan on staying in business for decades, but your term insurance is over after 20 years, you could be without coverage. As people get older, term insurance is more expensive and you are unable to build cash on it making it impossible to take a loan. You may want to consider a permanent policy instead, however, Term is a great product for paying off estate debt.
Permanent life insurance
These policies offer both insurance and an investment component, allowing you the incentive of having cash value. Part of your premiums pay for the insurance element of the policy and the other part will go to the investment portion unlike term insurance, which is insurance only. When you’re done paying term insurance premiums and the term is over, you get nothing back. While with permanent life insurance you will always have the investment part, and even if you let the policy lapse, you can still walk away with your investment portion. The cost of permanent insurance is much more than term insurance, but as long as premiums are paid, the policy stays in force for your lifetime. This is an attractive policy for individuals who want insurance to stay in force for longer than a specific term.
Depending on the kind of permanent policy, you can choose different ways to invest your cash value another incentive is you can also often borrow against the investment portion and use the funds as you please and even use it to pay off the premium for your business. It can then allow the surviving partner to buy out the part of the business owner who is deceased. So no matter what happens to you whether you die covered or outlive the policy money is always distributed. Unfortunately, with permanent policies, they are notorious for having higher fees and administrative cost.
Things to Consider
There are a few things to consider when deciding which kind of policy is best for you and your business needs. You may decide both kinds of policies are appropriate to satisfy different needs, with the right policy in place it can protect your business for years to come. Before you start shopping, be sure to go with a reputable long standing highly rated company that is sure to be around for decades to come in order to ensure that your beneficiaries get their proper payout. For short-term policies shopping online is recommended as you can compare rates. Lifequote.com, intelliquote.com are good search engines, when looking for something. For more advances policies don’t be afraid to seek the advice of a professional as they can give you the pros and cons of various policies as it relates to your own particular situation.
Don’t make the mistake of putting off proper insurance coverage. More than your business, your family, and loved ones can be impacted without having these policies in place. It’s certainly easy to put off obtaining coverage when the focus is growing a business and generating revenue, but in the long run this can be detrimental to your company.
The key to running a prosperous business is putting the right tools in place to position yourself for long-term success, to protect the assets you’ve worked so hard to build and peace of mind that the legacy you created will live on.
No one ever anticipates needing to use life insurance, we didn’t at first either, but the unexpected can happen. It’s always important to make sure your loved one is protected from financial disaster by being prepared. You can see how little it would cost you be getting a free and anonymous life insurance quote today.
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Melissa & Rodney
Co-Founders, Diamond Legacy Group
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