Can Your Business Survive Without You?
Imagine you're on a business trip in a busy city. As you're crossing the street, you get hit by a car that ran a red light and the worst happens. You bought life insurance for your family, but what will happen to your business and your employees? If your family had to sell the business, could they sell it for what they need to cover any outstanding debts and give employees a severance package? As a business owner, protecting your business in the event of your death may be just as important as protecting your family. That's why it's smart to have a separate life insurance policy that names your business as the beneficiary.
Term or Permanent?
The type of insurance you get for your business depends on a lot of different things. Term life insurance will probably cost less and it's a good option if you have business partners or if your business is in its infancy. The business would be the beneficiary, so your partners can use the funds from your life insurance policy to keep the business going until they find a replacement or buy your portion of the business from your heirs. However, if you buy a 20-year term policy, for example, you will be 20 years older when that term ends. Since life insurance premiums tend to go up as you age, it may cost more to get another term policy or to convert to a whole life (or permanent) policy. Although a permanent policy will likely cost less if you purchase it when you're young, the premiums typically cost a little bit more than for a term policy. If you plan on running your business until you die or if you don't have business partners, this might be a better option. A Shelter agent can help you determine which would be better for your business.
Just like a personal life insurance policy, when determining how much coverage your business needs, there's no set answer other than you can't have too much. The first thing to consider is the amount of debt your business has. Next, if you have partners, you should discuss what will happen if one of you passes away. Will the partners find a replacement or will they need funds to buy out your heirs? Or will each partner leave his portion of the business to the survivors?
As always, it may be a good idea to contact our local insurance agents to get the right life insurance options for you and your business.