Life Insurance for Small Business Owners
As a small-business owner, you wear a lot of hats. From billing and accounting decisions to marketing your products, there are several different decisions to be made, many of which fall on your shoulders. However, no matter how busy your day-to-day schedule looks, there’s one key piece of future planning you should prioritize in 2022: determining the best life insurance policy for your needs.
For business owners, having the right type of life insurance can make all the difference when it comes to protecting your brand, employees and loved ones. Plus, following the past two years, now might just be the perfect time to evaluate your coverage needs and take advantage of competitive policy pricing.
Understanding today’s insurance landscape
While many industries saw a dip in activity over the past two years, the pandemic unsurprisingly led to a surge in life insurance sales. For many Americans, this newfound priority stemmed from a desire to maintain financial security during a period of time when health and wellbeing were top of mind.
Although one out of three consumers were more likely to purchase life insurance as a result of COVID-19, Forbes has reported that this spike in demand has not led to increased pricing. Instead, policies have become more accessible than ever before,evolving with the widespread demand for easier and more efficient purchase processes.
Looking ahead to the remainder of 2022, insurance carriers are expected to continue adjusting their rates to reign competitively in today’s market. With this trend in mind,it’s an ideal time to go over your coverage options as a small-business owner.
Life insurance options for business owners
When you own a small business, you’ll quickly find yourself juggling several different insurance policies. As you consider the future of your company, however, one of the most important will prove to be comprehensive life insurance coverage.
Even if you’re no longer involved in the day-to-day operations, the right policy will help ensure that not only can your business move forward but that your loved ones will be supported as well. This is all the more true if you’ve taken out loans to grow your business or if your family members aren’t able to take the helm of the company in your absence.
Exact terms of coverage and premiums will vary, but as a small-business owner,you’ll likely want to consider a combination of the following:
Key person insurance
A key person life insurance policy is purchased by a company on the life of an executive or another employee who is crucial to day-to-day operations. Think of this coverage as a financial cushion, providing your company with the time and resources to find a suitable replacement or another strategy to save — or sell — the business.
For a small business, the “key” person in question would likely be yourself, in addition to any other founding members of the company as well as one or two vital employees.
A buy-sell agreement
If you serve as a co-owner, a buy-sell agreement gives the surviving co-owner the right to purchase the other’s shares at a predetermined price. Typically, a buy-sell agreement is most commonly used in sole proprietorships, closed corporations and partnerships.
Without a buy-sell policy in place, a business partner’s spouse or children may end up with shares in a business that they’re not necessarily familiar with or comfortable running. Establishing this agreement ahead of time ensures not only a fair price for all of the involved parties but also a clear continuity plan.
Individual life insurance
It’s not uncommon for small businesses to carry a significant amount of monthly overhead. In the event that you pass, an individual life insurance policy will help to keep the business operating. This provides your business partner or your loved ones with the immediate cash needed to keep your hard-earned legacy alive.
For some business owners, it may make more sense to have two different policies: life insurance for business partners as well as a personal life insurance policy. By having both forms of insurance, you can move forward with the confidence that your business partner and your family are covered.
Finding the right policy
When it comes to finding the best insurance coverage for your business, it all comes down to your specific financial goals and needs. Having the right policy is essential not only as it relates to the long-term success of the company you’ve built but also the wellbeing of your loved ones.
At CAM we do not sell insurance or receive any commissions from insurance products. As wealth advisors, it’s our desire and fiduciary responsibility to see our clients protect the assets they’ve worked hard to earn. We call this part of financial planning – risk management. If you’re looking for some additional support as you work to navigate your options, we would be happy to help advise you on what’s appropriate for your personal situation. Schedule a call today to get an unbiased opinion about life insurance.
M & A Consulting Group, LLC, doing business as CAM Investor Solutions is an SEC registered investment adviser. As a fee-only firm, we do not receive commissions nor sell any insurance products. We provide financial planning and investment information that we believe to be useful and accurate. However, there cannot be any guarantees. This blog has been provided solely for informational purposes and does not represent investment advice or provide an opinion regarding fairness of any transaction. It does not constitute an offer, solicitation or a recommendation to buy or sell any particular security or instrument or to adopt any investment strategy. Past performance is not a guarantee of future results. Diversification does not eliminate the risk of market loss. Tax planning and investment illustrations are provided for educational purposes and should not be considered tax advice or recommendations. Investors should seek additional advice from their financial advisor or tax professional.