Owning a small business is a big responsibility for a number of reasons. First, and most importantly, you have your livelihood and your family relying on the work that you do.
You know your values, work ethic, and goals, but you can’t say for sure what may happen to your health. When it comes to the things that you can’t control, it’s important to have insurance to provide a cushion.
But where do you start when looking for life insurance policies as a small business owner?
4 Things to Look For in Life Insurance Policies
Different life insurance plans bring different benefits, and each can be suited to your specific business needs. Here are a few major types of business life insurance plans and some of the things that you need to consider when finding a life insurance plan.
When considering insurance policies, try to frame your decision in the greater picture. How long will you conceivably be working? What kind of benefits do you need to fit your specific needs?
If you see employment ending in, say, the next five years, consider term life insurance. Should you need insurance coverage for an extended length of time, you may wish to consider permanent insurance.
Term life insurance is a pretty straightforward option for you. This type of policy exists for a set period of time and can end when that period is over. If you were to die during the term, your beneficiaries would receive the life insurance payout.
If anything happens after the policy expires, there is no payout. This type of life insurance is also cheaper because you’re pretty much only paying for the death benefit.
Premiums are based on age, smoking status, occupation and health factors. This is a great product to choose if you know that you will be working for a specific period of time.
2. Does the Policy Qualify for Add-Ons?
By add-ons, we mean additional coverage that you can apply for. These are sometimes referred to as “riders.”
An example of this would be if you worked in an extremely dangerous industry. If you have a workplace that poses a risk of death, you will want to look into AD&D insurance. This stands for “accidental death and dismemberment,” and pays out benefits to a beneficiary if you die accidentally or in an event that severs a limb or body part, this pays out to the insured.
3. How Affordable is the Policy?
What are the costs associated with the policy compared to the benefits? Additionally, how much can you reasonably afford? There’s no use in setting up a stellar life insurance policy if your business goes under to cover the costs!
Once you find a policy or two that fits in your price range, compare and contrasts the benefits of each. Whole life insurance, for example, offers an investment component that you can withdraw from if needed.
You’ll also need to consider your personal life when considering the cost of your insurance policies. It may not be too costly if you’re in great health, don’t partake in dangerous activities, don’t smoke, etc. However, if you’re a professional race car driver, your insurance costs will likely be higher.
4. Do You Need Key Person Insurance?
If you have an employee or partner that is integral to the functioning of your business, you should look into a key person insurance plan for that person. This person is usually the co-owner of a small business, but it could conceivably be any employee.
Ultimately, if the company would collapse without the presence of a person, that person needs key person insurance. A business will buy this insurance policy for the intended person, and if that person dies the company can receive the death benefit to help it survive the loss of one of its integral or key persons.
This money could be used to offset the financial loss that may occur in the event of a death of a key employee.
Do You Actually Need All of the Benefits Listed?
A specific policy may have exactly what you need and a whole lot more. That whole lot more is going to burn a hole in your pocket. It’s alright to have a little extra coverage, but those little extra costs can build up over decades of work.
The life insurance plan that you choose is going to be your bedrock. Your family will depend on payouts, and you may be paying into it for years to come. It may seem like a good idea to cut corners and just get the insurance policies taken care of, but that is likely a huge mistake.
If you are debating on just skimming over life insurance policies and moving on to the next thing, think twice, because it’s worth taking the time.
Consult With the Professionals
If you’re having difficulty selecting a life insurance policy in your small business, there are people you can talk to. Life insurance is a huge benefit, but there are costs, making it a major decision for any business owner.
If you’re looking for help with your life insurance policies, contact us and we would be happy to help.