Life Insurance and Business

Does your business have or need protection or a safety barrier, does it need more than you are expecting! The kinds of coverage that you require will depend on quite a few factors: Your business size, whether your business is a sole proprietorship, partnership, corporation or LLC, if you have employees or not, type of payment you receive (is it salary, fees, commissions), whether your business is service or product based, where it is located, and your exposure to liability.

Things to consider:

Is the life insurance that you have enough to safeguard your family, should you die suddenly? In the service business, your business’s value is worth nothing when you die. An example of this: The marital partner of a departed doctor or lawyer can only put up for sale the tools of the trade, not the customers (the true bread and butter of any service business).

You can sell your service business before your death, if you can foresee when that will possibly occur. Otherwise, all owners of service businesses should safeguard their families with a life insurance policy that is at least 7x their gross income.

If your objective is to have a person in your family take over your business upon your death, are they able (and licensed) to do so? Do you have disability coverage, in case you’re unable to run your company because of poor health, injury or accident? This type of insurance will generally give you about 60% of your earnings, for a predetermined amount of time. The subsidy may be assessed taxes or not (depending on whether or not you deducted your premium payments as a business expense). More imperative…do you have insurance for Business operating cost?

Who will cover the expenditures that it takes to run your business (utilities, insurance, payroll) while you’re out of commission? Disability Insurance does not encompass your business overhead expenses, if not purchased as an add-on.

If you have partners, does your arrangement contain a Buy-Sell Agreement? This will shelter your interest in the company, should your partner unexpectedly die. Example: your partner dies…his spouse claims her share of the company.

Do you really want your late partner’s family to take over their part of the business? This type of insurance would allow you to purchase your deceased partner’s portion of the business, avoiding any conflicts or interference by outside parties.

Do you have Disability Buy-Out Coverage? What would you do if a partner becomes incapable of performing or functioning as a part of the company?

Do you want to keep paying for work that he can no longer do, perhaps for years? Following a period of time, this form of coverage would compel your disabled partner to sell you his portion of the business, based on a previously signed reasonable agreement. Of course, many of these situations may not take place.

It’s your business, you determine which types of protection you believe more important…then talk with a professional who can show you the types of coverage needed to protect your family as well as your business.

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