The different business uses for life insurance will convince you that life insurance is not only an important component of personal financial plan but it helps in the financial stability of a business. In this article, we will discuss the different business uses for life insurance.
Cross Buy-Sell Life Insurance Agreements
Cross buy-sell agreements are when each owner or business partner purchases life insurance policies on the other partners. The policies are typically equal to the value of the ownership stake they each have in the business. These plans are structured in a way that the policy owner’s heirs can sell their ownership share in the business to the surviving business partners.
Group Life Insurance Policies
Group life insurance for employees of the business is a terrific benefit for your employees. It can help you attract and retain better business talent within your organization. It also helps protect the worker’s family should an unexpected death occur. Most often, these policies are paid for by the employer.
Some companies offer employees the ability to purchase additional life insurance should they have the need for more insurance protection.
Key Man Insurance – Key Person Insurance
In any business, key people are responsible for the success of the organization. Losing a key person to an unexpected death causes many businesses to fail or bankrupt. Key Man life insurance helps prevent business disasters when a key person in the business dies unexpectedly.
Having a key man life insurance policy protects not only the business but also all the employees and customers who rely on the business.
Business Loan Life Insurance
If your business must get a personal or small business loan, banks will often require a life insurance policy to be in place to act as collateral for the business loan. Term policies are a great solution for these business loan obligations.
Most insurers offer term policies beginning at 10-year terms. There are, however, some insurance companies that offer renewable policies in 1 year annually renewable increments or 5-year life insurance policies.
Independent life insurance agents such as Life-Wealth-Win, are the best place to find these insurance companies.
Business Startup Life Insurance
This is another business uses for life insurance. If you need to start a business but don’t have the money, you can borrow against permanent life policies to get your business venture up and running. Life insurance policies with cash value offer you this flexibility.
Tax-free Life Insurance Investments
Because life insurance policies are paid with after-tax dollars, the life insurance proceeds are not taxable when received by beneficiaries of business owners or employees. As your income tax rates increase over the years, you will have paid your income taxes with today’s less expensive tax burden.
Funds can also be withdrawn tax-free in loans from many life insurance policies.
Many companies also guarantee minimum interest rates within their life insurance cash value policies that guarantee you will lose no money, regardless of the current interest rate or what the stock market does.
Chronic or Terminal Illness
Many life insurance policies will allow business owners or employees to access your insurance benefits before your death if you become chronically ill or terminally ill. A percentage of your life insurance policy can often pay for medical expenses and other financial needs while you are still alive.