Life insurance is like a safety net; seeing life is full of uncertainties, what precautions have you taken to safely guide your business? It is part of a good defensive game plan to take full precautions and to ensure continuity of what you’ve worked hard for even after your death.
Contrary to the belief of the masses; “Why do I need life insurance?”, “I am still very young and full of age”, forgetting the uncertainties surrounding life’s expectancy. Hence, taking a step in gaining life insurance is like fixing a potential leak in your roof.
For individuals new to the term “life insurance”, the necessary information from policy to buying life insurance could be very confusing. So in this article, we will be discussing what insurance is, why you need life insurance to protect your business reviewing the different types of life insurance, and recommending the best to go for depending on your business type, plans, and goals.
Definition
Life insurance is a precautionary measure taken against the demise of an individual to protect family, loved ones and businesses or enterprises. It is a contract between an insurance policyholder (an individual) and an insurer/assurer (a company), where the assurer agrees and promises to pay a lump sum of money to a designated person(s) upon the death of an insured person.
Here, the policyholder (insured individual) pays a life insurance premium in exchange for coverage or assurance.
TYPES OF LIFE INSURANCE
There are basically four major types of life insurance policies, and these are;
1. WHOLE LIFE INSURANCE
As the name implies, the WHOLE LIFE INSURANCE spans through the whole life of the insured individual. It is a level of premium structure fixed for each year letting the cash value build up over time. It is also eligible to receive dividend payments from the life insurance company.
In WHOLE LIFE INSURANCE, its policies guarantee that the cash value would grow at a certain rate if all payments are made promptly. The amount paid by dividend however is dependent upon the performance of the company over time.
Whole life policies allow for loans such as Simple Business Administration (SBA) loans to be taken against the cash value of the policy. These loans can be taken for any reason and can be paid back if and when the insured the insured individual pleases.
2. TERM LIFE INSURANCE
Term life insurance is a form of insurance that guarantees payment of a fixed rate of payment to the insured’s beneficiaries if the insured person dies within a specified period of time. It is the least expensive type of life insurance and unlike the whole life insurance, the cash value does not build over time (making it bad for investment) and as a matter of fact, if the insured person outlives the expected length of years of the term of policy, no benefits are received. But if the person dies within the specified length of years, a full death benefit is paid in full.
Policies range from 10, 15, and 20 through 30 years. However, some companies sell increments.
3. VARIABLE LIFE INSURANCE
Variable life insurance is also referred to as “Variable appreciable life insurance”, it builds cash value that are invested in sub-accounts available in the policy. It is created for the purpose of meeting certain insurance needs, investment goals and for tax planning objectives. Variable life insurance pays a specified amount to the insured’s beneficiaries upon the death of the insured. Premiums are not fixed (hence the term “variable”) and are flexible; for this feature, it is a very attractive form of life insurance.
4. Universal Life Insurance
Universal life insurance is a permanent life insurance like the whole-life insurance, having coverage that lasts a lifetime, building cash value. However, unlike the whole-life insurance, it gives a level of flexibility to raise or lower premium payments but within a certain range. The cash value provides certain advantages while insured is alive such as; collection of loans and the death benefits are also adjustable since it is directly influenced by the premium you decide to pay.
Life Insurance for Business
Getting life insurance for your business is very paramount to its growth as it can help one break from regular bank loans subscribing for reputable loans like SBA loans instead, it is largely beneficial to employees (since it gives a sense of guarantee) and can help reduce taxes maximally. Also, since your business partners and employees rely on you for livelihood, it is only wise to secure their future and that of your company after you or any valued employee must have died.
However, the choice of the Life insurance policy you can subscribe for is largely dependent on personal and corporate goals for family, employees, and company.
Sadly, many small and medium business owners do not know the benefits of a life insurance policy and how it can greatly benefit their businesses. Let’s look closely at some 0f the benefits of insuring your small or medium-scale business.
Benefits of life Insurance for Business
Some benefits of life insurance for business are;
1. Sustainability of Business
Life insurance would serve as a sustainable measure to help keep your business afloat long after you are gone, providing enough income to support the growth and smooth running of your company and covering expenses such as personal debts., loans, and recurring expenses that are a threat to the company after your demise.
2. Serves as Capital and Covers Unexpected Costs
Since most life insurance increases in cash value and provides interest or dividend which is accessible to the insured, it gives an opportunity to collect this fund to substitute unexpected expenses or losses. One can also collect SBA loans which are repayable at the insured’s discretion and are way safer compared to the traditional bank loans which can hamper family savings and become a burden to the family of a deceased.
3. Tax Benefits
There are varieties of tax benefits associated with life insurance as it provides a place to grow wealth tax-free. And this covers the cash value growth while the insured is alive or after he must have died.
Taxes can be very exhausting even to contractors, freelancers, or someone who is self-employed as their social security is not covered by any external company making the bills cumbersome.
The tax benefits include but are not restricted to, tax-free retirement income, task-free use of cash value growth, task-free policy loans, and lots more.
Having looked at Life insurance policies and how it relates to your business, it is important to point out at this point that the best life insurance policy suitable for your business is the whole life insurance seeing its vast number of benefits.
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