3 Reasons Why Business Owners Needs a Life Insurance

As a small-business owner or partner, you may wonder what would happen to your business should anything happen to you.

       How would your family survive with the loss of your income?

       What about your employees and their families? How would their future be affected?

       What happens when a business has debts that are backed by assets like the family home or a partnership agreement?

You’ve probably planned for some of these questions, but before you take that leap of faith, look at these common myths and consider a reality check.

• If I die, my spouse can run the business.Reality check: In many cases, the spouse neither wants to nor can run the company. Small businesses are often dependent on the marketing, technical or managerial skill of the owner. Take that away and the business may fail.

• A competitor will buy the business.
  Possibly, but this may not happen to the advantage of the surviving family. The competition may be either looking to take customers away from the business, purchase equipment and inventory cheaply or buy the business at a low price.

• My death or my partner’s death will not financially impact the business.
  Each owner of a small business usually makes a very specific and important contribution to the business or has a special skill that is hard to replace.

• A key employee can run the business.
  Maybe so, but if the employee is truly running the business, he or she may require a salary commensurate with the added demands of the job. The funds needed to keep everything going may be more than the business can bear.

Here’s where life insurance comes in. Three important ways that life insurance can protect your small business include:

1. Key person insurance. This is a life insurance policy purchased by the business on the life of a key employee and payable to the business in case of death. When a key person dies, insurance can help make up for lost sales or earnings and cover the cost of finding and training a replacement.
2. A buy-sell agreement funded with life insurance. This allows remaining business owners to buy the company interests of a deceased owner at a previously agreed-upon price, which helps guarantee that surviving family members will be fairly and promptly compensated for their share of the business. A well-crafted buy-sell agreement should be prepared by a competent and experienced attorney.
3. Individual life insurance. A policy that you own individually can provide your family with additional money to pay off personal debts, cover ongoing living expenses and fund future needs such as college or retirement.

About CMR | PolicySmart®

PolicySmart’s risk management consultants provide independent group benefit, retirement and commercial insurance advice by reviewing your current portfolio of policies to improve coverage and reduce cost. By using our proprietary database – The CMR Database® (comprising some 13,000 brokers and specialists globally), we maximize access to the insurance and retirement industry providing greater options that will translate to better coverage and lower cost.

Please email croche@policysmart.app or call 888-873-1982 or 212-447-4300 for more information.  www.policysmart.app