Risks are inherent in any business, and no one knows more about risks than entrepreneurs. But with so much uncertainty in business and so many perils in life, it’s quite troubling that many entrepreneurs still find it hard to consider life insurance as essential.
Everyone knows that doing business can be costly. You’ll have to invest a sizable amount of capital, time, effort, and most of the resources at your disposal. But it’s not just the whole gamut of investments that matter. Life is.
That’s right. The life of your small company depends on you and on the lives of a few important people in your business. But while it’s easy to be optimistic, the fact remains that unforeseen situations happen, both in life and in business. In the blink of an eye, any one of us can die and leave everything behind. And that’s why life insurance is important.
A life insurance can protect you financially. It can keep your business afloat, shield your business from possible financial losses, and keep your family stable even when you pass away. In other words, getting a life insurance is a wise financial decision. It ensures the stability and continuity of your business and it can keep your family financially secure.
As an entrepreneur, you need some types of insurance that can give you protection and peace of mind. And here are some of the real situations that explain why.
LIFE INSURANCE FOR VENTURE CAPITAL FINANCING
Turning to a venture capital firm to finance your business comes with certain conditions. When you finally secured one, you might find that aside from investor rights and terms of control among other things, the venture capital company will be most interested in how it can protect its investment.
The way the investors see it, it takes more than the viability of your business. To protect their interests, these investors will try to ensure that your company would remain in good shape even if you die. And so, they would require you to take an insurance, which in most cases, is a key person policy.
If your business is a sole proprietorship, the venture capitalist would naturally get worried that in the event of your death, your company will die with you. And in the wake of your passing would be an enormous amount of financial losses, not only for your company but for the investors as well.
By getting an insurance, the investors will be assured that even if you die, there will be sufficient fund that can be used to cover the expenses and pay the company’s outstanding debts. Otherwise, they might be forced to shell out the money themselves, which could be another blow to the venture capital firm.
As an entrepreneur, taking an insurance should be one of your priorities from the very start. It doesn’t only protect your company, but it also increases your chance to get funding from investors because they know that you have taken the necessary steps to mitigate financial losses.
KEY PERSON POLICY
Every business has to rely on key people to keep it stable and running. As the owner and founder of your small company, your business depends a lot on you, your business partner if you have one, and maybe a couple of your business executives whose functions are crucial to your operations. This presupposes that the death or disability of any of these key people would be highly detrimental to the life of your company.
No one can foresee the future. And despite the scientific approaches to business, any small company can potentially go under when a key executive dies. With a single stroke of bad luck, the loss of a major go-to-guy can sink the company just as fast as the death comes.
In a nutshell, the key person policy means that your business is heavily reliant on a few important people. They could be those whose talents bring in financial stability to the company or those whose specific skills-set is vital to your business operations. Whatever the case, losing any of these people could be disastrous and covering them with insurance can help your business stay afloat.
Some business owners know the importance of this. Sean of Frootful Marketing, an SEO agency, says: “If something happens to one of your best guys, your business will take a huge loss long term. Even if you find a replacement immediately, it will take time to restore the same momentum. This is why key person policies are important.”
The question that usually arises is how much should you cover for the life insurance of the key people in your company. The best way to decide is by determining how the death of a certain key person would impact your business financially. You need to gauge wisely and make sure you’ll do it right.
BUY-SELL AGREEMENT
When you’re running a business with some partners, it is essential that you remain in control of the company when a co-owner dies. It ensures the stability of your business because you might not want to end up sharing the company with someone you don’t really know or trust, even if it’s your partner’s heir.
To make sure that your interest stays protected as a co-owner, you can enter into a buy-sell agreement with your partners.
In a buy-sell agreement, you will sign a legally binding contract with your co-owners. This contract stipulates that in the event of the death of a partner, you and the rest of the co-owners will have the right to buy the share of the deceased from the heirs. This does not only help the family get an amount of money due to them, but it also protects the company from issues that may arise out of claims for the deceased partner’s interest in the company.
One of the easiest ways to initiate a buy-sell agreement is through a life insurance. In this process, there are two commons options. According to CFAinsure.com, buy-sell agreements are some of the most common reasons entrepreneurs get life insurance.
The first option is the so-called cross-purchase plan wherein each co-owner buys a life insurance on the other co-owners and each one becomes a beneficiary of each other’s insurance. When a co-owner dies, the surviving co-owners buy the interest of the deceased in the company from the family using the money received from the insurance.
The second option is the so-called entity redemption plan wherein the company buys a life insurance on the co-owners who all agree to sell their interest to the company when they die. When a co-owner passes away, the company uses the money from the insurance to buy the dead owner’s share in the company from the family.
Just like the other types of insurance that are designed to protect the company, the buy-sell agreement life insurance ensures that the interest of the company remains protected and the business will not get derailed.
KEEPING YOUR LOVED ONES FINANCIALLY PROTECTED
As an entrepreneur, no matter how big your dream is or how great your desire to succeed, it doesn’t take away the fact that your ultimate goal should be the welfare of your loved ones. No other type of sound financial planning or wise business decision serves the interest of your family better than making sure that they will be financially protected even when you die. A life insurance ensures this type of protection.
It’s easy to dismiss the thought of needing a life insurance. But if your loved ones depend on you financially, just imagine what would happen if you suddenly die and your company goes under? It will be a big blow for your family and they might even end up losing some of the assets that you have left.
With a life insurance, you will still be able to take care of your family even when you’re gone. The money from the death benefit, depending on the amount of the policy, could potentially keep them financially secure and stable for years to come.
GET INSURED TODAY! HERE’S HOW YOU CAN START
Remember that while most entrepreneurs embrace risks, the ones who likely succeed are those who are better prepared. They recognize the potential impact of these risks and they find ways to minimize its effects even before they happen.
To get an insurance that is best for your business and family’s interest, we recommend that you go with any of the trusted independent life insurance agencies. They know a lot of insurance companies and they are well connected in the industry.
As your representative, they can go around and find the best insurance company that you can deal with, regardless of your insurance needs.
Take note of the independent insurance agents who will be working on your behalf are licensed professionals and they can give you any best advice that you need.
Unlike going directly to an insurance company, working with an independent insurance agency assures you that your interests will be fully protected. They will be working solely for you and not the other way around.
WORK WITH US!
As an entrepreneur, getting a life insurance is one of the soundest business decisions that you can make. Whether you’re an established enterprise or a startup, it is important that you start looking at insurance not as a requirement, but a necessity. And just like anything that’s needed, it must be a priority.
At InsureChance, we can shop around for you and help you find the best life insurance deal with the best policy and rate.
As an independent online life insurance agency, we represent over 60 trusted life insurance carriers. We are highly experienced in getting the best life insurance deal for our clients and we can do the same for you.
Get a quote with us today and we’ll get you the right policy at the right price. Call us at 888.492.1967!
