Reasons Why Entrepreneurs Should Rely on Life Insurance Plans: life insurance policy
New to buying life insurance? What is Life Insurance?
A life insurance policy is a contract with an insurance company. In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured’s death.
Typically, life insurance is chosen based on the needs and goals of the owner. Term life insurance generally provides protection for a set period of time, while permanent insurance, such as whole and universal life, provides lifetime coverage. It’s important to note that death benefits from all types of life insurance are generally income tax-free.
There are many varieties of life insurance. Some of the more common types are discussed below.
Term life insurance
Term life insurance is designed to provide financial protection for a specific period of time, such as 10 or 20 years. With traditional term insurance, the premium payment amount stays the same for the coverage period you select.
After that period, policies may offer continued coverage, usually at a substantially higher premium payment rate. Term life insurance is generally less expensive than permanent life insurance.
Needs it helps meet: Term life insurance proceeds can be used to replace lost potential income during working years. This can provide a safety net for your beneficiaries and can also help ensure the family’s financial goals will still be met—goals like paying off a mortgage, keeping a business running, and paying for college.
It’s important to note that, although term life can be used to replace lost potential income, life insurance benefits are paid at one time in a lump sum, not in regular payments like paychecks.
Universal life insurance
Universal life insurance is a type of permanent life insurance designed to provide lifetime coverage. Unlike whole life insurance, universal life insurance policies are flexible and may allow you to raise or lower your premium payment or coverage amounts throughout your lifetime. Additionally, due to its lifetime coverage, universal life typically has higher premium payments than term.
Needs it helps meet: Universal life insurance is most often used as part of a flexible estate planning strategy to help preserve wealth to be transferred to beneficiaries. Another common use is long term income replacement, where the need extends beyond working years. Some universal life insurance product designs focus on providing both death benefit coverage and building cash value while others focus on providing guaranteed death benefit coverage.
Whole life insurance
Whole life insurance is a type of permanent life insurance designed to provide lifetime coverage. Because of the lifetime coverage period, whole life usually has higher premium payments than term life. Policy premium payments are typically fixed, and, unlike term, whole life has a cash value, which functions as a savings component and may accumulate tax-deferred over time.
Needs it helps meet: Whole life can be used as an estate planning tool to help preserve the wealth you plan to transfer to your beneficiaries.
Find out how insurance policies could help your business maintenance.
Although an entrepreneur needs to spend majority of his or her time preparing for the rewarding business meets and elevator speeches, only a handful actually give equal importance to the concerned families.
While an already established businessman can get away with minor financial constraints, it is necessary for a startup owner or rather a small businessman to plan for contingencies, especially when there is a family to look after.
Why get insurance?
Most people say that life insurance policies are necessary when a businessman is looking to start a family of his own but for an entrepreneur; the entire business setup is like his baby which needs to have protective backing of its own.
This is where life insurance policies come into the mix. Moreover, the myth that only the working class needs to ensure their future needs to be debunked as life insurance policies are and will be relevant, even for every class of individual.
Are there other benefits of a life insurance policy?
While a conventional mind only tags life insurance as future support, it also comes forth with a host of entrepreneurial benefits.
Although protecting the family is the most pronounced attribute, an insurance policy can also help them avail sizeable business loans. However, we would now be discussing a bit more about the process, in detail:
Business loans and life insurance policies: The connection
Entrepreneurs often need some additional financing to take their business to a whole new level. However, the concept of ‘money makes money’ can only be applied if proper chunks of investment are injected into the venture.
While investors might not always be willing to help, businesses can avail of a decent amount of loans against the Life Insurance policies. Moreover, there are countries where SBA or small-business loans are only provided if the person lending the same has an active life insurance policy.
Moreover, it is important to note that banks offer loans depending on the insurance corpus and how the policy fares against the tenure of the loan. While the life insurance policy can act as a constant validator for the banks to trust the customer, there are certain entrepreneurs that are known to use the policy as loan collateral.
Bestow CEO, Melbourne O’Banion also states the fact that a sizeable life insurance policy has the ability to skyrocket business growth, especially when it comes to availing additional financing for smaller setups.
The procedure, however, is quite simple as the policyholder needs to sign a particular agreement with the lender which states that in the case of an untimely death, the benefit will be first paid out to the person lending the amount and then the proceeds will be offered to the policy beneficiaries.
How entrepreneurs can deal with the uncertainties of life?
Businesses, unless established over a period of years, cannot vouch for anything certain, even in terms of profits or survival. Moreover, the entrepreneurial pressure on the individuals is immense which eventually takes a toll on the body and mind. In addition to that, businesses can never run without the existing risk factors and this is what makes the role of insurance policies all the more important.
It must be understood that setting up a business isn’t a mere gimmick but a responsibility that needs to be fulfilled with considerable attention. Needless to say, a business or rather a corporation comprises of multiple employees and their livelihood depends on the smooth running and sustenance of the venture.
Therefore, here are some of the most probable reasons why every entrepreneur must get hold of a life insurance policy:
In the case of a permanent disability or illness, the insurance amount can be used to run the business in a seamless manner.
Life insurance policy means that business handover, in case of untimely death, doesn’t become a major deterrent.
Last but not least, there are senior citizens who plan on starting small businesses and the perfect insurance policy would allow them to move forward with renewed vigor.
However, in the case of insurance for older individuals, the perfect policy must be identified using the seniors life insurance finder. Although most startups are fuelled by the young blood, senior citizens are known for their experience which makes them excellent candidates, in regard to business setups.
Life insurance policies that are relevant to business setups
Although there are quite a few life insurance policies for entrepreneurs to look at, there are quite a few aspects that need to be looked at before zeroing in on the perfect one:
The insurance policy must be able to provide financial support to the entire business setup in case of an untimely demise.
The concerned policy should be able to take care of the existing liabilities
Last but not least, an insurance policy must be able to support the family of the entrepreneur in his or her absence besides offering affordable premium plans to the policy holder.
The answer to all the requirements has to be the term insurance policy which is extremely essential for entrepreneurs. What needs to be understood is that a term insurance policy has the ability to take care of all the existing individualities besides helping entrepreneurs in case of emergencies.
A term insurance policy can be extremely beneficial as it offers substantial coverage to the concerned individuals without them having to pay higher premium rates. While the sum assured is only guaranteed in case of death, it also comes handy in case of permanent disability.
Here are some of the immediate benefits of a term insurance policy that offers:
Exceptional levels of financial security to the entire family of the businessman
Help in repaying loans and other kinds of business debts or liabilities
Ability to maintain the existing lifestyle even when the entrepreneur isn’t around
How to choose the perfect insurance policy for your business?
Before an entrepreneur starts envisioning the perfect life insurance policy, it is necessary to assess the requirements well-in-advance. Firstly, it needs to be understood whether the policy is opted to serve as collateral or to protect the family of the concerned individual, in case of his demise. Not just that, individuals must also asses the monthly budget which might come in the way of paying premiums. Moreover, the timeframe for securing the policy is also necessary to take note of before planning to get hold of a life insurance policy.
Life insurance policies can surely come in handy for individuals who are looking to add an extra layer of security to their existing business ventures. Be it term life plans or senior insurance policies, these insurance schemes can empower any business setup by offering the necessary cover to the entrepreneurs.
Most importantly, a small business owner needs to give additional importance to these insurance policies as he or she is more susceptible to risks as compared to some of the other individuals. Last but not least, the concept of business succession and legacy is well handled if and when a relevant insurance scheme is added into the mix.
That said, the coverage amount pertaining to an insurance scheme is completely relevant to the lifestyle of the concerned individual.