Great companies look at the past, present and future. To succeed, you must learn from past lessons and mistakes while taking advantage of opportunities in the present. You also need to start planning for the future, should something happen to you down the road, by having a succession plan in place with a chosen business life insurance beneficiary.
Wondering why our experts suggest business life insurance for succession planning? Read on.
What is succession planning?
Succession planning refers to the strategy companies make to transfer business leadership from one party to another should an owner be absent. After the time and effort you put into starting and building your business, your family, employees and customers deserve to see it continue and thrive…even in your absence.
In addition to determining which parties would take over control of your business, succession planning includes:
- Work with/inform executive and legal teams on these future plans.
- Train employees in the skills and leadership qualities needed to succeed in the new roles.
- Regularly reevaluate and adjust the policy as necessary; (for example, changing the plan in the event of someone leaving the company or a critical condition that leaves them unable to take control).
- Create a business life insurance policy.
When does business life insurance come into play?
You̵7;ve worked through your succession plans, but are the plans financially feasible for everyone involved? To ensure that the chosen party(ies) in your succession plan have the means to take control, business life insurance is key.
Let’s say your succession plan designates a business partner or family member to take over. A buy/sell agreement on your life insurance policy can help them buy the deceased’s shares immediately and without business interruption. It offers immediate liquidity to fund a buyout as determined in your succession plan.
Business life insurance is also invaluable for your successor moving forward. When an important part of the founding leadership is missing, it can be much more difficult to obtain funding. Life insurance benefits can provide money to keep the business running smoothly while adapting to changing dynamics.
How do you choose a life insurance plan and beneficiary?
Although it may seem daunting, a local, independent agent can help guide you through the process of obtaining life insurance for your business. They help you understand policies and choose the best coverage for your business based on its size, industry and needs.
Once a policy is in place, it’s time to declare the appropriate beneficiaries. Don’t rush into the decision. Spend time thinking about key contributors to your business, family members, or others you would like to select for this role. Consider holding a meeting with senior members of your team to discuss the matter further.
Once you have made a decision, inform the beneficiary of this role and ensure that they are willing and able to take on the responsibility in the event of your death. If they agree, update the appropriate paperwork and set up the plan. Make sure the recipient’s name and information are correct and update them if they change.
Establishing a long-term plan is critical to the success of your business, and naming a beneficiary for business life insurance is one part of that. For all other business insurance needs, Frankenmuth Insurance is here. Talk to a local, independent agent today.