Protect the Future of Your Small Business With Life Insurance—Yes, Life Insurance
One thing every business owner needs is life insurance. It’s not something you normally think about when starting a business, but it should still be at the top of your list. Life insurance not only protects your business in the event of your death, but also your loved ones who are left with your business's expenses.
Most small business owners have their life savings invested in their businesses. As such, the business is one of the only things left for their descendants.
Life insurance can help protect the business, as well as those you leave it to. In fact, some experts state that life insurance is the most important insurance coverage you can purchase as a small business owner. Before you shrug off this advice, take a look at a few reasons why you absolutely must have life insurance if you own a small business.
Why You Need Life Insurance
Many people believe that life insurance is a waste of money. That is one way to look at it; however, just as your business is an investment, life insurance can be considered an investment that protects your business.
Paying a little bit of money now will help protect your business in the event of your death. Think of it as surety that once you are gone, bills will be paid and the business can remain with your family—as opposed to them having to sell it to pay the bills.
While having life insurance is not always an SBA loan requirement, it is recommended that you have it and often is required by lenders, especially when there is concern over whether your business could survive without you. I recall obtaining life insurance myself as a prerequisite to obtaining a small business loan a few years back. Understandably, the bank wants to protect its financial interest in the event something should happen to you.
Having life insurance will help pay back any loan you owe the bank so it will not be forced to take ownership and sell the business to repay the debt.
Things to Remember
Make sure you purchase enough coverage. Coming up short can be one of the biggest mistakes you can make when obtaining life insurance. Think about it. Not to be morbid, but what happens when you die? Will your business survive? What about your family—will they be able to maintain the business without going broke? Make sure your policy will pay out at least the debts you owe so your family will not be forced to come up with the difference.
Life insurance is a living document. By that I mean you must make changes to your policy as life events change, similar to what you would do with a will. If you fail to update your beneficiaries, you will have no say in what happens in the event of your death. Don’t assume that people will “do the right thing” once you pass.
Purchase from a reputable company. Simply having life insurance is not good enough. After all, you want to make sure the insurance company does what it is supposed to do in the event of your death. Entrepreneur.com recommends using a rating service such as Standard & Poor’s or Moody’s to determine the health of the company you want to purchase from.
Don’t let your coverage lapse. While you will not have to deal with the disaster, others will. If your policy is cancelled for a missed payment, it could mean the loss of your business. Wouldn’t it be stupid to lose your life-long investment over a missed payment, most of which are under $100?
