Business Life Insurance: Is It Worth Considering?
Business Life Insurance
Running a business, big or small, is a thrilling and rewarding experience.
It provides you with a very steady income if you are successful but it also gives you a sense of security and freedom that you couldn’t get from your average 9 – 5.
But the ins and outs of running a successful business can be complicated and overwhelming at times and picking out what insurance plans and types suit you and your needs can be part of that pressure.
When it comes to business life insurance, there are many questions that you need to ask yourself, such as who are the key individuals that need protection, what are the consequences if I don’t pull out a policy and how would the business manage if a key person was gone suddenly?
Do I need relevant life insurance or key man insurance?
The answer to all those questions will give you a clear indication of what is right and wrong.
So we have put together a simple guide so you can further understand and assess what type of business life insurance is for you and if, in the bigger picture, it is worth it.
The Power of Protection
Business life insurance can take many forms. If we’ve learned anything about business models, there’s no one-size-fits-all, so there has to be some differentiation so everyone can get a policy that works best for their business model and size.
Key Man Insurance
Also referred to as key person insurance, it is a policy that protects your business if a critical employee, whether it’s a business partner or a member of your management, passes away or becomes terminally ill.
The payout can be used to find a replacement, cover lost revenue, or maintain financial stability during a difficult transition.
There is also a mourning process that needs to be considered. Of course, there is a business to run but when a key person can’t be there dramatically, it can affect multiple staff members so this insurance policy also allows members to grieve without consequence.
Shareholder Protection
Shareholders are a key part of any business, as they have a say in how things are done and are a key part of the growth and bigger picture.
So as a result of their death, their shares are then passed down to a family member, whether it be their partner or child, which means this individual who hasn’t been familiar with your business or is remotely involved now has a say.
Therefore, shareholder protection ensures business continuity in the event of a shareholder’s death.
The remaining shareholders can use the insurance payout to purchase the deceased’s shares, preventing ownership disputes or unwanted external investors.
Relevant Life Insurance
Relevant life insurance is one of the only policies that is an allowable business expense.
A bonus of this is that it provides your company with corporation tax relief and covers both directors, key people and all employees.
This might be a great go-to for businesses that just want one way to cover everyone.
If the person covered passes away, the family of the insured receives a lump sum payment under this type of death-in-service benefit.
Because the applicable life policy will be left into a relevant life plan trust—which may take the shape of a discretionary trust—there is no inheritance tax to pay.
Executive Income Protection
An executive income protection policy is intended to replace your necessary income if an accident, disease, or injury prevents you from working but not from returning back to work after their health is in order.
The monthly benefit from this insurance coverage is equal to 80% of your average monthly income.
It can be given to you as a wage or retained in the firm to assist during periods when your income may be lower than usual.
With business owners in mind, executive income protection offers a few elements that set it apart from standard income protection policies.
Whole Life Insurance
Term life insurance and permanent life insurance, sometimes referred to as whole life insurance, are the two main types of life insurance policies.
One of the most common options is usually term life insurance because it is usually far less expensive.
On the other hand, policies for term life insurance will ultimately expire—either at the end of a predetermined period or when the maximum age is attained.
At this point, policyholders will either have to forgo coverage or, if that is not possible, obtain new insurance at a greater cost.
Term life insurance has an expiration date; whole life insurance does not.
It is intended to offer coverage for life. The policy will pay a death benefit as long as the premiums are paid and it isn’t canceled.
Although there are other permanent life insurance plans, whole life insurance is the most straightforward and well-liked one.
Even though whole life insurance costs more than term life insurance, whole life insurance has several benefits.
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Category: Life Insurance
