Life insurance is a way to provide financial support for those who depend on you after your death. These are usually your loved ones and family, but if your business is a provider for others, you may be able to provide financial support for them as well. You should also consider the financial viability of your family and your business.
Life insurance is a more complicated topic than it is for other people, but it is a crucial financial consideration. Knowing the best types and benefits of life insurance for business owners can help you feel more confident when you are choosing policies to buy.
Business owners can get life insurance
Your life insurance decision may be more complicated if you’re a business owner. If your business is unable to function without your help, you may need to protect your family’s income. You might also need to ensure that your loved ones are not burdened with any business debts should your death occur.
It is possible to cover people other than your immediate family. You may want to include your employees in your life insurance decisions. To protect your business and yourself, you might even consider purchasing a policy for someone who is important to your business operations.
Different types of life insurance available to business owners
Your business’s goal will determine which life insurance policy you choose. Business owners can choose from a variety of life insurance policies. You may also select multiple types of policies to meet different needs.
Life insurance for the individual
Personal policies will protect you and pay a death benefit to your beneficiary if you die. These policies are typically used to support family members and loved ones who rely on your income. There are many types of personal insurance policies available, including universal life insurance, whole-life insurance, and term life insurance.
Bankrate’s insurance calculator can help you determine how much you may need to insure your personal policy. To help you budget, we have broken down the cost for life insurance as well as how it changes based on age and other factors .
Insurance for key persons
A key component of any business owner’s life insurance portfolio is key person insurance. Key person insurance, as the name implies, pays out a death benefit in the event that an integral member of the company dies. Either you, the business owner, could buy a policy for key personnel, or an employee.
The premiums for these policies are usually paid by the business, and the business is often listed as the beneficiary. The death benefit amount is paid to the business upon the death of key personnel who are covered under key person insurance. You can use the death benefit to hire and train new employees or to pay off any outstanding debts.
Buy-sell agreements can be funded with life insurance
A buy-sell agreement is a way to protect your family and business if you are co-owners. This agreement allows you to set a price at the which your co-owners will be able to buy your shares if you are no longer able to do so. This agreement protects your family from stressful negotiations and allows your business to continue running smoothly.
Your co-owners will have to purchase your shares of the business if you die. They will be able to buy your shares if they have bought life insurance policies on you.
How to apply for business life insurance
While deciding which life insurance policies you need for your business is more difficult than it is for others isn’t too difficult. Here’s a step-by -step guide for business owners who want to apply for life insurance.
- Choose the policies that you need. Personal life insurance may be a good option if your family and loved ones depend on your income as a business proprietor. If you or an employee are essential to your company’s success, key person insurance is important. If you or your business partners need additional funding to purchase each other’s shares, life insurance might be used to fund a buy/sell agreement.
- Decide who will purchase which policy. You, the business owner, will generally be the one buying these policies. If you purchase life insurance to finance a buy-sell arrangement, each owner must also purchase policies on the other owners.
- Each policy will have a death benefit. Your individual circumstances will determine the death benefit of each policy. You may choose to leave your beneficiaries with only a portion of your policy. You may also need sufficient coverage to cover your debts.
- Compare quotes. Once you’ve identified the types of policies that you require and have the details, you can begin to contact the life insurance providers for quotes . To help you get started, we have compiled a list of the most trusted life insurance. If you have an existing policy, you might want to look around and switch to find one that meets your needs.
- The underwriting process is completed. The underwriting process for life insurance is quite complex. You may also need to have a medical exam. You may need to have a medical exam if you purchase multiple policies from different providers.
- Select your beneficiaries. While you likely had beneficiaries in your mind when you applied for life insurance, you will need to designate them as beneficiaries once you have actually applied. Beneficiaries could include your family, employees, business partners, or even the business itself.
- To begin coverage, sign the policy. To make the policy effective, you will need to get underwriting approval. You will be informed by your insurance provider about the signature requirements and where they must sign it.
For any questions or concerns regarding the application or underwriting process, please contact your agent or insurance company.
Questions frequently asked
Which is the best life-insurance company?
Bankrate has created the top 2021 life insurance companies to help you find coverage. It is still a good idea to compare multiple quotes. Your unique needs, your budget, and your health will all play a role in choosing the right policy.
Why should business owners have life insurance?
There are many reasons why business life insurance is important. You can protect your family by ensuring that the right policies are in place. This will prevent them from having to deal directly with the company’s debts or have to sell your shares. If you or a key member of your team dies, life insurance can protect your company. While business owners might need to consider different factors when buying life insurance, they are still an important part of financial planning.
Are all business owners required to have life insurance?
There are many life insurance requirements. Consider how your family and business will be affected by your passing. It is also important to consider your co-owners and employees. Talking to a licensed life insurance agent or financial advisor can help you decide how much life insurance you require as a business owner, and the type of policies that you should be considering.