Talking life insurance can feel like a dark prospect for anyone. For business owners, aside from the emotional difficulty of end-of-life planning, life insurance may fall low on the priority list and outside of the budget amidst important daily tasks, operational expenses and growth strategies.
However, you’re doing your business a disservice if you don’t take great effort to ensure its continuity should you or another key player at your company pass on. Your business includes the people you employ, the community members you serve, any suppliers or vendors you partner with and any partners who share ownership of the company with you.
Planning for a business transition or succession doesn’t exclusively mean planning for end-of-life situations. Many business owners design their plans with retirement or family transitions in mind. However, you must account for various high-impact scenarios, such as you, your partner or a key person passing away. You must also prepare those who will take up responsibility in the absence of a key person.
In addition, if you have family members who rely on your income or who would take on your assets and debts, you want the appropriate insurance in place to support them should you pass on.
Here, we’ll cover life insurance essentials for business owners so you can be prepared for anything.
Business owners have several options when it comes to life insurance. With each option, you’re helping ensure the financial security of individuals and operations that depend on you or another key person today. Strategic life insurance planning, along with transition and estate planning, will help protect your family, community and business.
To identify the right life insurance plan to include in your overall strategy, here are top considerations to add to your checklist:
Your options for insurance are permanent, such as whole life, and term, which has a set term length. Term is lower cost, but you don’t get the value back when the term ends. Permanent is more expensive, but it has cash value and you can use it during your lifetime.
Term is one of the more common insurances. However, permanent life insurance is becoming a more attractive option with the introduction of the Consolidated Appropriations Act, 2021. This act lowered key interest rates for such insurance policies to 2 percent – down from 4 percent. Now, insured persons can fund their policies more without a penalty from the IRS for violating modified endowment contract rules.
Because the death benefit is determined by the interest rate, with a lower rate in place, the cost of the insurance is now lower, which makes this more of a savings opportunity today.
Business owners can use life insurance to diversify their retirement plan.
For verifying if your life insurance will perform as you need it to, you might consider a life insurance review. Our advisors can assess your current policies and plans and help you achieve optimal alignment. You may find that the way your policies are designed and beneficiaries assigned will incur more taxes than necessary and end up costing more in the end than you intended. Insurance options are ever evolving, so you may be missing out on new products and features that would benefit your business and family greatly.
Financial Advisor offers Investment Advisory Services through Eide Bailly Advisors LLC, a Registered Investment Advisor. Securities offered through United Planners Financial Services, Member of FINRA and SIPC. Eide Bailly Financial Services, LLC is the holding company for Eide Bailly Advisors, LLC. and Eide Bailly Agency, LLC. Insurance products are offered or issued via Eide Bailly Agency, LLC. Eide Bailly Financial Services and its subsidiaries are not affiliated with United Planners. Not all products and services are available in all states.
The views expressed are those of the advisor and may not reflect the views of United Planners Financial Services. Material discussed is meant to provide general information and it is not to be construed as specific to investment, tax or legal advice. Individual needs vary and require consideration of your unique objectives and financial situation.
Diversification is a strategy to manage risk, but no investment strategy can guarantee profits or protection against losses in declining markets.