Small Business Life Insurance is used to protect a business, or the family of a businessman, from the financial loss.
Small business owners depend on their enterprise as a primary source of family income and security, an investment vehicle, and major asset in their personal estate. If a key individual dies and the business fails, financial hardships can follow unless certain timely steps are taken. Business Life Insurance proceeds can be used to fund legal agreements designed to fit your business needs when a key person dies.
Business Life Insurance is used to protect a business, or the family of a businessman, from the financial loss resulting from the death of someone associated with the business. Billions of dollars worth of this protection is now in force, giving assurance of business continuity, and protecting the owners or shareholders equity,
There is no basic difference between business life and policies used for personal and family needs. But the protection set up by business firms involves many more complex details to meet legal financial, tax and technical problems. It is life insurance custom-tailored to the individual business. Like a personal fingerprint, no two Business Life Insurance plans are precisely alike in all details.
Specific purposes for business life insurance:
- Key-man protection to reimburse for loss or provide replacement in the event of the death of a key employee.
- Partnership insurance, to retire a partner’s interest at death.
- Corporation insurance, to retire a shareholder’s interest at death.
- Proprietorship insurance, to provide for maintenance of a business upon the death of a sole proprietor.
- Insurance to aid a firm’s credit status, covering the owner or key man during the period of a loan or the duration of a mortgage on property held.
- When the estate of a businessman consists almost entirely of his interest in a business, insurance on his life, payable to his family on his death, to provide with ready cash and to aid in liquidating his interest in the business.
Many agents who sell business life insurance are familiar with the whole range of state planning issues faced by business owners, However, they prefer to have their client's lawyer barker and accountant drawn in for consultation. The business owner, devoting his energies to making the business a success, is not usually in a position to analyze his insurance needs. Such a prescription calls for highly specialized knowledge and technical advice.
Tax implications, value and next steps
Tax factors, both income and estate, are involved in many business life insurance arrangements. Taxes need to be considered, so that the plan set up today will not involve unnecessary additional taxes. This too, is a matter that should be left in the hands of the experts.
Most business life insurance plans use life insurance that has cash value that grows over the years. This provides a valuable reserve for emergencies, in the event of any sharp changes in business conditions. When necessary, the policy cash values can be used as the basis for loans. If this type of policy is not possible, forms of term insurance may be used.
Once established, business life insurance plans should be reviewed regularly. Business and financial conditions change, tax laws vary in effect, and the needs of owners change with time as well. It’s always wise to check with legal and financial professionals and to select a reputable insurance agent when considering any form of business insurance coverage.
Your business insurance broker can help determine if plans for employees, group life insurance, disability income insurance, health care and major medical coverage, and other types of insurance are right for your business.