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If you own any type of small business, you know just how much of your dedication, time, money and energy is required to ensure its success. Most likely, you have already purchased various insurance policies to protect your company against loss. These may include insurance against damages, property insurance, theft insurance and fire insurance.
However, there is often one type of insurance that small business owners neglect to purchase – term life insurance! Purchasing term life insurance for the main employees in your business is a wise decision. It can help your business survive any rough periods if a key employee ends up dying prematurely or becoming permanently disabled. Common Uses for Term life insurance Most small business owners purchase term life insurance for one of two reasons: to cover expenses if a key employee can no longer work because of an accident or permanent disability or dies or as a form of partnership insurance. For the latter, a company will take out a term life insurance policy for each partner and name the other partner or the company as the beneficiary. Maintain Control of the Company If a partner dies while the life insurance policy is still in effect, the death benefit can be used to purchase that partner’s share of the business from the individual’s beneficiaries. This offers protection from the remaining partners having to accept a new partner through inheritance; term life insurance enables them to maintain control of the company. A term life insurance policy can also protect companies from any financial losses caused by a business owner’s death or the death of one of the company’s partners. Protect Family Members & Loved Ones Term life insurance is not only for the protection of owners or partners in a business – it can also protect family members and loved ones from any business losses incurred by a premature death. You can relieve your family from any financial liability and ensure your company will be able to take care of its financial commitments if you purchase a term life policy on your life and select your company as the beneficiary. Protect Yourself From Financial Losses To protect yourself from any financial losses resulting from a death of a key employee, you can insure all the key employees in your company by purchasing a term life insurance policy. Just imagine what would happen if one of these individual suddenly died? Without term life insurance, you would have to pay all of the associated costs of finding and hiring another employee, and you would lose all of the income that particular employee normally generated. Enjoy Peace of Mind An inexpensive term life insurance policy with the company as the beneficiary can provide you with the peace of mind that your company will be able to continue if a key employee dies or is permanently disabled. It will also ensure that you have sufficient funds available to complete a search to replace this person with another employee. How to Determine the Amount of Coverage If you are having difficulty determining how much insurance coverage you should purchase for every key employee, decide how much it would cost your company to continue running if any one of these individual died. A good place to start is half of the annual salary earned by the employee. This will cover any recruitment and hiring costs, as well as expected financial losses while the position remains vacant. If you own a small business, you should insure yourself and all of your key employees by purchasing term life insurance. The premiums are quite low, but term life can protect you and your family from financial losses if you or a key employee dies. Term life insurance will also enable you and your partners to maintain control of the company until you find a replacement. As you can see, the cost of term life insurance is well worth the peace of mind and financial security it represents. |
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