Many small and medium business owners are unaware of the many benefits that a whole life insurance policy can have for their business. Not only will a life insurance policy ensure that your family is taken care of financially in the event of your death, it can also protect your business and the other people involved in it.
We’ve put together a few of the main reasons why a life insurance policy is essential for any business owner.
#1. It’s an Ideal Place for Business Capital:
As a contractual owner of a life insurance policy, a business owner has the first rights to the cash value. This means that when unexpected business expenses arise, the business owner is able to leverage against the cash value of the policy in order to satisfy an expense. Business capital can then be redirected back to the life insurance company, which can make those funds once again available for future business expenses.
#2. It Provides a Business Secession Plan:
A whole life insurance policy known as a buy-sell agreement can provide an ideal business exit strategy in a partnership, or where more than one business owner is present. Using this strategy, a whole life policy is purchased for each business owner. When a business partner dies, the surviving business owner can use the death benefit proceeds of their life insurance policy to purchase their portion of the company. It is important to prepare for when a business partner dies, as their life insurance policy will be assigned to the remaining owner or owners, giving them complete access to the cash value.
#3. It Provides Business Owners with Tax Benefits:
There are many tax benefits associated with whole life insurance, which include both the cash value growth during the time that the insured is living, along with the death benefit after the insured has passed away. In other terms, it can provide the beneficiary with a place to grow wealth tax-free, and with careful planning, the distributions can also be taken tax-free.
#4. It Protects Intellectual Capacity:
A life insurance strategy known as a ‘key person’ policy allows for businesses to protect against any lost revenue resulting from the loss of key employees. Business owners have the option to fund these life insurance policies and then utilize the cash value in order to finance business expenses and any future business liabilities. The death benefit of this policy provides capital to business owners, which can then be used to offset the cost of filling the void left by key employees.
#5. It Can Attract and Attain High-Quality Employees:
Whenever an insurance company issues a policy, it is done because it is determined that the policy owner is anticipated to incur financial losses when the insured passes away. The insurance industry refers to this as ‘insurable interest’, which is generally allowed for business owners on their employees as it is assumed that a business will suffer a financial loss when an employee passes away.
Whole life insurance is an excellent asset for business owners to utilize, providing benefits such as growth, flexibility, and security.