4 types of life insurance policies available for small businesses
If yours is a small company, you probably want to put safety nets to help you recover financially in the event of a serious claim. But have you considered life insurance? Many small business owners overlook this cover because they think of it as just another bill. You don’t have to make this mistake, given how vital this policy can be to the survival of your business and the wellbeing of those who rely on you.
There are several life insurance policies to choose from for business owners. In this article, we take a look at four main ones that we recommend you take out. We also recommend that you check out Caspian Insurance for the best quotes and advice on policies that suit your business.
Key person life insurance
Key person life insurance is also referred to as key man, key woman, or business life insurance. If your company has someone whose untimely demise would be catastrophic to the future of the business, you should consider taking out this policy. Picture this for example; you have someone who your business relies on heavily for leadership, experience and industry connections. What would the company do if they were gone?
This is where key person policy comes in to soften the blow. It pays directly to the company to find and train a replacement, maintain profit, or even pay off debts.
Individual life insurance policy
As the name suggests, individual life insurance covers one person in the business, usually the owner. If you were to pass away, would your loved ones keep up with the business operations or be forced to liquidate?
By taking out an individual life insurance policy, it helps to ensure that in case of your demise, your loved ones will get an agreed lumpsum amount to pay off funeral bills and even sustain the business until it’s stable again.
In a nutshell, this policy is an essential part of any small business that wants to continue growing and thriving even after their owner is gone.
Group Life Insurance Policy
Group life insurance policy is similar to individual life insurance, only that it’s offered to all your business staff. For small businesses that are conscious about finances, this is a more affordable option than covering everyone individually.
Take note of what the law says before going for group life cover. In some cases, you might be required to cover at least three-quarters of the workforce.
Group life is offered as a term insurance policy, and this counts in the overall cost of the cover.
Businesses with more than one owner need to have a buyout or buy-sell agreement in place. In the event one of one owners passes away, this agreement allows the sale of the business share to the remaining owner(s) at a predetermined price.
But how can the remaining owner be sure that they will afford the share of the business? This is where shareholder protection comes in to fund buy-sell agreements. If ensuring continuity of the business is important to you, life insurance saves the business from being taken over by families who are not well-versed enough with the company.
What is the best life insurance policy for my business?
As with most things in life, there’s no a one-fits-all solution when it comes to business life insurance. Indeed, what works for someone else might not necessarily be suited for your current situation or need.
For example, we highly recommend taking out key person insurance to guarantee the survival of your business if you (or another high-value employee or partner) were to pass away. On the other hand, if your company strives for a fair and safe work culture, you may want to provide group life insurance to enhance employee satisfaction and retain the best talent.
So which policy do you think makes the most sense for your business currently? Let us know your feedback in the comments section below!