Posts filed under 'business life insurance'
Most small businesses, which provide the majority of employment, kind of fly by the seat of their pants when it comes to the area of life insurance and a business continuation plan. Just some food for thought. In the US today, you are more likely than not to either own a small business or be employed by a small business.
Whichever category you fit in to, there is a critical question that needs to be addressed. It affects your family. What if the owner, or a partner (oneof the owners) in a small business dies? Obviously, in the absence of adequate life insurance, whoever passes away will leave behind a family with some very hard choices.
Does the family sell the business? Truth is most small businesses are worth what the company earns while the owner is alive. Does the family try to continue the business? The truth is that generally family members aren’t interested in or capable of running the business. What usually happens in the absence of adequate life insurance is the employees are laid off and the physical business is sold for whatever it can bring.
Business life insurance can take the burden off the family, off the employees and off the business.
If it’s a partnership, a buy/sell agreement whereby both partners have life insurance, guarantees a fair price to the family of the deceased partner. If it is a corporation or sole proprietorship, a life insurance policy can allow the family to pass the business on to an employee or employees.
If you own a business or work for a small business, have a discussion with an independent life insurance agent today about what would really happen if you didn’t come to work tomorrow due to your death. It is a sobering thought when you consider the impact on the lives of your family, and your employees and their families. The cost is minimal in reality and almost invisible in proportion to the potential damage.
June 14th, 2007
How often do we hear it? A friend or family member has had a heart attack or been diagnosed with cancer at an age that is just, well….wrong! We expect health problems and death when someone gets into their 80’s. It’s not nearly so common in their 50’s and 60’s, or even 70’s anymore. But there’s that once a year shocker where somone we know that is in their 30’s or 40’s has some serious health issue diagnosed. Quite often we hear about their death. The question is, if they knew it was coming, would they consider life insurance differently?
I’ve been there and understand that bomb proof, immortal feeling at that age. We see bad things happen to the wrong people at the wrong age all the time and, because we have a shield of immortality (or denial) around us, we think we are somehow living in a different world. Certainly it could happen to them, but not to us.
Consider for a minute that there is something that would cost less than a dinner out every month. Life insurance can be that inexpensive and in will ensure the future of your family in the event you happen to get being one of them. It can not only insure you now, but it can also guarantee, or lock in your insurability for later years when the chances of health problems increases. Wouldn’t it be great to know that you were still insuring your family’s future for the cost of a dinner a month when you had recently been diagnosed with type 2 diabetes, breast cancer or melanoma. Once you have that great rate, it can’t be changed just because your health does.
Maybe life insurance isn’t the most popular subject, but it’s one that should be discussed earlier rather than later. Better that business partners set up a buy/sell agreement and buy business life insurance when they are both healthy. Better that a husband and wife discuss the real needs and make a purchase that will ensure financial security while they are young. I personally think buying juvenile or children’s life insurance with a guaranteed insurability feature is a tremendous gift. One they may not understand for years, but one that can make a huge difference for them down the road.
Like I said yesterday…..it’s time to talk about it. Too much is left undiscussed and as a result, not acted upon. How about we have a very frank discussion for the forseeable future about this whole idea of pulling all of our collective heads out of the sand and taking a look a reality? I’m up for it!!
May 3rd, 2007
In the excitement of starting a new business all the focus is generally onward and upward and the tendency is to kind of overlook the downside to success. This is more prevelant in partnerships, but is also a real problem for sole proprietors and corporations. Business life insurance can protect your family from losing the fruit of your labor and can also keep someone else from owning part of your business if a partner dies.
The obvious need for a business owner is to carry enough term insurance to make sure that all the debts of the business are taken care and don’t become a burden to your family. Most small businesses don’t have any real “market value”, so your heirs won’t really have anything to sell if you die prematurely. A life insurance policy can replace the lost income value of that business to your family.
In the case of a partnership it becomes more complicated. In most states if a partner in a business dies, their portion of the business is left to their heirs, their family. So you could go home one night and come back the next day with a new partner, one you may not want to work with at all or one that may not have any qualifications to work in the business. This problem is best solved by putting together a buy/sell agreement and funding it with buy/sell life insurance policies.
Then, in the case of an untimely death, the life insurance policy would provide the funds necessary to buy out your partner’s portion of the business. I know in my business I would much rather come in that morning and know that all of this was planned for and everyone will get what they need. Contact a good independent life insurance agent for quotes today on business life insurance.
March 27th, 2007
My mother never told me running a small business was easy. In fact it went something more like, “wouldn’t you be better off getting a real job?”
Whether you are in business for yourself, or work for someone, your future can be in jeopardy if you, or they, have not adequately protected the business with business life insurance. The untimely death of an owner, partner, or key person in a business when there is no business life insurance such as a buy/sell insurance policy or key man insurance in place can be the beginning of quick end.
We often think of life insurance just in terms of protecting our family from the loss of income if a parent should die, or in terms of final expense or burial life insurance. The unexpected death of a business owner or key person can have a dramatic impact, not only on their family, but on the employees of the business and their families.
If you own a business and don’t currently have business life insurance, meet with an independent life insurance agent soon and review the structure and financials of your business. The agent can then make recommendations and provide insurance quotes that help your business become a legacy to your family and your partner(s) and employees, rather than a loss to them all.
In most cases you will want to look at term insurance or possibly return of premium term insurance rather than universal life or whole life. Why term insurance? The truth is that most businesses change too rapidly to make locking in even the longer terms or permanent insurance. A more prudent approach is to look at each aspect of your business and consider the proper term length. It may take more than one life insurance policy, but with term insurance being as affordable as it is, you should certainly be able to protect your business without significant impact on your budget.
So, mind your own business! A good steward of a business will ensure that the business will survive them.
February 25th, 2007
If you’re an adult with any kind of responsibilities in this world, you should be carrying a life insurance policy. That old saying that “there are two things that are certain in life, death and taxes” has a lot of truth to it. The big difference is that you know when the taxes come due.
So to keep from leaving your responsibilities, whether that is a family, a business, or a debt, not taken care of, follow these instructions. Go online and make it easy on yourself. Do a search for term life insurance. Scroll down past all of the big on line brokerages like Selectquote, Accuquote, Eterm, Reliaquote, etc. I’m not saying that you can’t get life insurance there, but if you pass them up and go down to an independent agency you can a more accurate insurance quotes, get life insurance just as fast, get it at the same price and……..you’ll actually get good service.
Talk to an independent agent and tell them what your responsiblities are and ask them to make recommendations. Ask them to explain the different options such as whole life, universal life (mkae sure you ask them about a no lapse guarantee), term insurance and return of premium life insurance.
Then make a decision. Put something in force. Take responsibility.
OK. I heard someone say whoa! You want to shop around and think about it and compare things and think about it and check the company ratings and financials and think about it and beat it to death. Whoa! There’s that word again. Death!!! Remember, you know when the taxes are coming due. I’ll bet every person you know or stop on the street can tell you of a story of someone who died an “untimely” death.
So, buy the life insurance. Pay for it on a monthly basis and then do all of those things you want to do to make sure you got the best deal with the best company. If you find something better, apply for it. Once it is approved and you know you have a better deal, put it in force and cancel the one you bought. That is the responsible thing to do.
Disclaimer: All of my opinions are valid in all 50 states and DC.
February 17th, 2007
This is a country made of small businesses and generally speaking, all of those that have employees have managers. As long as I am sailing with generalities, I think it’s safe to say that a good manager is a very valuable asset. Which leads me to another generality. I believe that most business owners would agree that insuring the valuable assets of their business is a prudent idea. And lastly, the loss of a valuable asset can cause a substantial financial loss to the business if it isn’t insured.
I’m not sure an attorney of generalities could have built a better case for a type of business life insurance called key man insurance. The way key man insurance works is that a value is determined that represents the loss to a business if the key person should die. It can be done several ways, but for the sake of this example we will say that the life insurance policy, in this case, a return of premium term insurance policy, is two times the annual premium of the manager. We pay our manager $125,000, so we insure his life for $250,000.
We have determined, in this case, that it would take about two years to hire, train and bring up to speed a new manager. Because our manager is so integral in the success of the business, we anticipate that there would be some turmoil caused by his untimely death. There might be customers lost, production slow downs, employees lost, etc. We might also need to anticipate paying a hiring bonus so we can hire as high up the food chain as possible to minimize the turmoil. Anyway, suffice it to say we can certainly justify the key man policy.
Now to why I decided to buy a return of premium term policy to fund our key man policy. Let’s say that our manager has 15 year to go to retirement when we purchase the policy and, being the good employee that he is, he doesn’t die but keeps on doing a stellar job right up to his retirement day.
During those 15 years we have insured a valuable asset of the business to protect the business. Our manager has made us tons of money and save us hundreds of tons of headaches, because that’s what good managers do. So now it’s time to give him a bonus.
Our return of premium term policy has cost the company $4000 a year for the last 15 years and now, because our manager is still alive and we bought the right kind of life insurance policy, the company gets back all of the premium paid in. Well, that just freed up $60,000 that we can hand to our retiring manager at his going away party. A bonus for a job well done.
If that doesn’t get you all choked up, you could be a manager whose employer bought the wrong kind of term life insurance.
February 16th, 2007
Needless to say, these kinds of events can definitely present you with some challenges. Partnerships are tricky enough. Without the right business life insurance or buy/sell life insurance policy in place, the partnership can remain tricky long after the deceased partner is gone.
In general, a business partner’s portion of the business would be passed on to his or her family upon death. This can take place in a few ways.
One scenario is that the spouse or a surviving child of your partner would move into the partner’s old position and continue on kind of like nothing ever happened. A problem can arise if that spouse or child isn’t qualified to do the job, in which case you would probably prefer they weren’t there. A problem can also pop up if their aren’t any family members who want to step in, but they can’t afford to just walk away from the income generated by the half of the partnership they used to enjoy.
A buy/selll life insurance policy, usually a term insurance policy, can alleviate the problem. Each partner would carry an amount of insurance adequate to buy out the other partner’s portion of the business. That would provide the funds necessary to formally purchase the partner’s interest in the business from the deceased partner’s family.
So, what happens if your business partner wakes up dead today? Before that happens, get together with an independent life insurance agent and get some life insurance quotes today. Discuss a binding agreement with an attorney. You’ll be surprised how a little money can defuse a potential time bomb.
February 15th, 2007
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