Life insurance for the start-up stage
If you have just started your business journey, the company is probably completely dependent on you. It is not yet established enough to drive successfully without you making decisions day in and day out.
Your death or disability
Should you become disabled or die, the value of the business may decrease significantly, your family may lose control of the business and property transfers may become tricky if the successor is not ready.
Financial loss can also be significant. You often have to take out a small business loan to start a business. Lenders require security and personal property is often used.
Should the business face tough times, the family has a lot to lose. Unfortunately, many family-owned companies experienced this in 2020 due to the COVID-1
Start-up & # 39; s Solutions
Proper life insurance and strategy can help protect both your business and your family.
A death benefit
If you die unexpectedly, the death benefit from your life insurance provides cash quickly to keep the business running or pay off debts that the company may have had. A small business loan can also be repaid with the death benefit.
Life insurance provides first and foremost a death benefit. But it can also help if you become disabled.
With life insurance, you can include specific riders to protect against loss due to a chronic or fatal illness. With these riders, the insurance company, if you have been diagnosed with a qualified medical condition, can access part of your police death benefit while you are still alive to use however you want.
A permanent life insurance not only has these equestrian options, but many insurances have an accumulation function.
Permanent life insurance premiums are much higher than for life insurance, but some of the premiums you pay go to the cash value account. This account grows slowly over time and you can access it through policy loans and withdrawals while you live.
Policy loans are to some extent tax free, not reported to the credit bureau and do not need to be repaid while you are alive. These features make them an appealing option if you need money for a business opportunity.
If you suddenly can not work, you can take out an insurance loan to pay bills until you are back on your feet.
All insurance loans you do not repay while you are alive are taken from your insurance death benefit on your death before the benefit is distributed to your beneficiaries.
»Read more: Life insurance for start-ups
Life insurance for the growth business stage
If your company has reached the growth stage, you will see that your hard work begins to yield results. The business still relies on you, but at least there are probably others who will help you.
Growth company risks
In the growth stage, you will probably still pay off your small business loans. If your business expands, you may also have taken out additional loans. Personal property and the company itself are in danger if you do not have financial protection in place.
Losing key people
When the business has grown, you have probably had some employees stand out. These individuals have become crucial to the success of your business.
While it is a relief to know that if something happened to you, these employees can keep the business going in the short term, but it is also another risk you need to prepare for. What happens if these key people leave or die?
Without these key people, your business may experience management, business or product development disruptions. You can lose customers. It would also take significant time and money to replace them.
The Growth Business & # 39 ;s Solutions
Life Insurance on a Key Person
A death benefit from a life insurance policy used in a key person strategy can help your company get through a potentially difficult time if an employee who is critical of the business goes away.
It can potentially help your business access credit, which may be needed more than ever. When a banker is dealing with a company that has a key person whose loss would disrupt the business, the banker will often make the key person's life insurance – with benefits equal to the credit limit allocated to the bank – part of the approval process.  Life insurance income can help look for new talent that can provide the skills and expertise that the business needs. Not to mention giving financial cushion when it takes time to train replacements.
»Read more: Using key person's life insurance to secure your business
Death benefit for debt repayment
The death benefit of a policy, used for creditor protection, can be used to repay business loans or other debt so that the company's assets do not need to be affected. It can also help repay a bank loan that required a life policy as collateral.
The death benefit from a life insurance policy can provide the family with enough liquidity to keep a business afloat as they work through their loss.
Life Insurance for mature business stage
When you reach the mature stage of your company, cash flow is generally stable and profitable. You have a strong management team and planning for the future of your company, without you, must be at the forefront of your mind.
The Mature Business & # 39; s Risks
As a business matures, your business value increases. Do you want to transfer the business to the family with its success? Are there co-owners?
Many entrepreneurs want to keep the business in the family. By going this route, there is potential for liquidity and tax issues, and parents may find it difficult to compare a legacy for children who are not in the industry.
Money to Retire
In addition to planning for the future of your business without you, you need to plan for your own future without the business. If you do not plan enough, you may find it difficult to maintain your lifestyle in retirement.
The Mature Business's Solutions
A buy-sell agreement
A buy-sell agreement has several uses. Its main purpose is to help entrepreneurs transfer the business to predetermined successors.
- Ensures continued operations.
- Protects against unwanted heirs or outsiders.
- Secures a predetermined and fixed price. .
- Avoids business complications.
- Provides financial security.
A buy-sell agreement is triggered by your disability or death. It helps ensure that the business is smoothly transferred to the new or remaining co-owner and ensures that the owner is not forced to work with family members if they do not want to. It also provides financial protection for your family.
Without the buy-sell agreement, the business legally goes to the beneficiary of your estate, probably your surviving spouse or relatives if you are unmarried. This person may not want to take control of the business. This person may not be the best choice to take control either. A buy-sell avoids this situation.
A buy-sell agreement can be financed by disability insurance or life insurance, depending on its purpose.
Cash value for retirement
A common use for cash value insurance is supplementary pension income.
A permanent life insurance policy can help protect your business, your financial future and your loved ones. When you retire, you probably have a smaller need for death benefit protection and a greater need for tax benefits.
A permanent life insurance has growth potential for cash. In addition to the tax-free death benefit for your beneficiaries, the cash value account accumulates with tax deferral and you can take out tax-deductible insurance loans.
Let the cash value account preferably grow untouched until retirement. Due to the increasing interest rate growth, you will then have a significant cash account if needed.
With the possibility of gaining access to a life insurance fund, you can also delay taking social pension benefits. If you delay with social benefits, the amount you receive increases every month.
»Read more: How Cash Value Insurance Is Beneficial Upon Retirement
Life Insurance For The Transitional Stage
After working hard for it for a long time, you deserve to enjoy your last stage of life: retirement. It is important for entrepreneurs to have an exit plan.
Transition Stages Risks
Closing the business
If it's time to leave the business and you do not have an exit plan in place, it will leave you, the successor owner and your family in danger. Many times, a thriving business will fall when an owner wants to retire because there was never a clear plan to transfer it.
It is not uncommon for some family members to be involved in the business and some not. If there is not equal participation, there may be an unequal distribution of wealth when you die.
Failure to prepare for this inevitable inequality can cause many troubled property problems, in addition to family conflicts.
Transition Stages Solutions  A buy-sell agreement
What happens to their share in a family-owned company or company with co-owners, when the time comes and an owner is no longer part of that business?
agreements ensure that those who want and can take over the business do so. And it ensures that your family members do not leave anything behind when you die.
A buy-sell is financed by your life insurance. The death benefit goes to the new business owner to buy out the deceased owner's share from the estate.
A buy-sell can also give an inheritance to your loved ones who are not involved in the family business.
»Read more: Life insurance for business follow-up planning
An entrepreneur needs life insurance
No matter what stage your company is in, life insurance can provide many benefits.
Do not wait to buy a policy. Whether you need life insurance, a type of permanent life insurance or a mixture of both, it is always cheaper if you buy it sooner rather than later.
Your age and health are two major factors in determining the cost of your life insurance.
Quotes Can Help You Get A Plan For You. Term insurance is straightforward. Get quote insurance directly and then easily apply directly online.
Permanent life insurance is more complex. Fill out the inquiry form on our entire life insurance page and a Quotacy advisor will contact you to review your needs and provide a personal quote.