Life insurance is an important part of retirement and financial planning for most people and families. It helps to ensure our loved ones will be taken care of, paying off mortgages to allow families to stay in their homes or paying for secondary education so children can go to college debt-free.
Many people use life insurance as an investment tool, accruing cash value, taking withdrawals, and borrowing against the fund. If you own your own business, you may be wondering the best way to protect your investments through life insurance.
Read on to learn more about life insurance for business owners. You can contact us at EINSURANCE for help purchasing your life insurance policy.
Life Insurance is Important for Business Owners
It is even more critical to have sufficient life insurance when you are a business owner. Every business is different and has its own unique needs – and to protect it, life insurance is one important type of insurance coverage you should have.
Some life insurance policies provide additional benefits that you can take advantage of, from policy loans and withdrawals to acting as collateral for third-party loans. Some policies act as investment vehicles and grow in value over time.
There may be tax consequences for withdrawing funds too early, though, so make sure you talk with your financial advisor or agent to understand the best ways to utilize funds from your policy.
Why do I Need Life Insurance as a Business Owner?
Life insurance plays a critical role in protecting your business. If you have partners, part of your partnership agreement may entail each of you having life insurance – this is to protect the partners if you were to pass away. Each partner maintains their life insurance so the business stays protected.
You may also want life insurance as a business owner so your family does not become burdened by supporting the business operations. A life insurance policy can help protect them from using funds from your estate to run the business. This allows you to keep your professional and personal interests separate.
Types of Life Insurance Policies to Consider as a Business Owner
There are three types of life insurance policies to consider. Each has a place in your financial planning, so talk with your agent for more help in determining which types of life insurance you should consider as a business owner.
Whole Life Insurance
Whole life insurance, sometimes also called permanent life or straight life insurance, is a permanent policy with steady premiums throughout the time the policy is in force. Whole-life policies are particularly valuable because they also accumulate cash value over the time you own the policy. We can help you with a whole life insurance quote.
Universal Life Insurance
Universal life insurance is a form of permanent life insurance. The coverage builds cash value and lasts for a lifetime, as long as you continue to pay your premiums. The cost of your policy is covered by the premiums, which also earn interest over time. Eventually, the accumulated value of the policy exceeds its policy costs (costs of mortality and policy administration).
Term Life Insurance
Term life insurance is an approachable way to buy life insurance – it is a basic policy where you can decide the length of the term as well as the amount of coverage you would like to purchase. When the term of your policy ends, you stop paying and stop receiving coverage. If you survive past the policy term, there is no death benefit payout. Some term policies are able to be converted to permanent ones based on various conditions – check with your agent if you own a term policy you want to see about converting.
There are two types of term insurance you can purchase – level term and decreasing term. Level term is the most popular and refers to a term policy that pays out the same death benefit amount if death occurs any time during the policy term. Decreasing term policies have a death benefit that decreases over the time the policy is in force.
Some carriers offer an additional option called “return of premium“. This means if no claim is filed during the term – and other conditions are met – premiums can be returned to the policyholder. The carrier will charge steeper rates and often impose conditions, like that the policyholder maintains the policy in force until the term ends.
How do I Purchase Life Insurance as a Business Owner?
Talk with your business partners and your family about your life insurance needs and how to best protect your business interests. We can help when it comes time to reviewing life insurance options and deciding between term and permanent policies and the amount of coverage you may need to have.
Purchasing life insurance is an important decision so make sure you have an agent with you every step of the way to compare quotes and explain terms and conditions. We’ll make it easy for you to find the best life insurance for your needs as a business owner.
Contact us at EINSURANCE to learn more about life insurance for business owners. We can help you compare quotes, select your life insurance policy, and save!