For any business owner, life insurance is an important and vital component of your financial plan. It protects your loved ones and business from the potentially devastating effects of your unexpected death, allowing you to leave behind a legacy while providing them with the resources they need to move forward without you. But deciding on life insurance can be difficult; there are many different kinds of policies, and each one comes with its own set of risks and benefits, which can make it tough to figure out which policies are right for you, as well as how much coverage you need.
Why life insurance is important
There are many different reasons why business owners should purchase life insurance policies. The most important reason is to provide funds to your loved ones in case of an unexpected passing. If you don’t have life insurance and pass away, your family will be left with nothing in terms of income or assets. This makes it extremely difficult to cover your monthly expenses. In addition, life insurance provides a considerable amount of tax benefits if purchased through a qualified plan. One way that can help reduce taxes today is purchasing term insurance. It doesn’t cost much more than regular health coverage, but it provides enough money to pay off a large chunk of debt after death so taxes won’t eat up as much.
Types of Life Insurance
There are many types of life insurance to consider when you’re creating a business owner’s coverage policy. Here is a look at some of your options Considered one of the most comprehensive types of life insurance policies, term life insurance provides protection for a specific amount of time—often 20 or 30 years—and pays out in case of death during that period. Most often, there are no cash values associated with term policies, meaning beneficiaries receive only what has been paid into them upon death.
Things to think about before buying a policy
If you buy a policy when you are young and healthy, but become ill or disabled later in life, your premiums could skyrocket. On average, men in their 50s are charged 5 to 7 times higher rates than younger males; women over 50 pay 10 to 12 times more than they did at age 35. If you buy a policy when your children are young and still require care, your premiums may be affected by their health.
How much coverage do you need?
Before you choose a policy, experts recommend getting a clear picture of your debt and other obligations—so you know how much life insurance you really need. If you’re married or have kids, you should consider purchasing coverage that extends to your family as well. (Some businesses also require it). For more information on how much coverage to get, check out our related post: What is Term Life Insurance?
What are the costs?
It’s true that life insurance can be expensive—especially if you only need a little coverage. (That’s why it pays to shop around, compare prices, and pick up any discount you can get.) However, in many cases, it’s cheaper than you think: Many small business owners are surprised to learn that they can get $500,000 worth of term life insurance—the most common kind—for as little as $25 or $30 per month.
Tips to save on life insurance
If you’re a business owner, term life insurance is a must—but it doesn’t have to be expensive. Think about your business and its cash flow, then see if you can build term into your budget. Here are some ways to save on life insurance
Is there anything else I should know?
When you’re on your deathbed, you’ll most likely be surrounded by loved ones and important people from your life. So who should be there if you aren’t there? It’s a question every entrepreneur needs to ask themselves and it starts with getting life insurance. If you leave behind a company, loved ones will need to maintain that business in order to keep that income flowing into their pockets – do them a favor by making sure they have what they need!