As a small business owner or partner, you may ask yourself, “what would happen to my business should anything happen to me?” How would your family manage the loss of income? What about your employees and their families? What happens when a business has debts backed by investments like the family home? You’ve probably prepared for some of these questions, but have you considered how life insurance can protect your small business. Here are three types of life insurance policies that can be a financial lifeline for your business.
A key person insurance is a life insurance policy that a company purchases on an owner’s life, a top executive, or another individual considered critical to the business. The business is the beneficiary of the policy and pays the premiums. This type of life insurance is also known as “business life insurance.” When a key person dies, the insurance policy can help make up for lost sales or earnings and cover the cost of finding and training a replacement. Typically, a small business key person is usually the owner or a key employee or two. The main qualifying point is whether the person’s absence would cause significant financial harm to the business. If this is the case, key person life insurance is definitely worth considering.
A buy-sell agreement, also known as a buyout agreement, is a legally binding contract funded by a life insurance policy that can help minimize the disruption caused by the sudden death of a business owner or partner. This allows remaining business owners to buy the company interests of a deceased owner at a previously agreed-upon price, which helps guarantee that the surviving family members will be compensated for their share of the business.
An individual life insurance policy that you own individually can provide your family with the financial protection they need. Whole life insurance policies may be the best option for you. These policies combine the traditional death benefit with a “cash value” that continually grows. Any amount within a policy’s cash value can be withdrawn at any point in your life as a loan, though there may be a minimal percentage of interest charged and a lower amount earned on the loan amount until it’s repaid. Even if you never borrow any of the funds, the policy’s death benefit increases along with the cash value, so your dependents benefit nonetheless.
You are putting your business and family at risk by not having a life insurance policy. Make sure you have the right insurance policy to cover all the people who depend on you.
Cosmo Insurance Agency is a full-service independent insurance agency based in Hackensack (Bergen County) and Lakewood (Ocean County), New Jersey that offers an all-encompassing range of insurance options for both individuals and businesses. Cosmo keeps its promise to assure an efficient and creative approach to the services we offer. Each of our clients experience a personalized and long-term relationship with us. Our New Jersey based team of health brokers guides our clients in helping them choose the most cost-effective options. By incorporating our knowledge of the insurance guidelines for healthcare, employee benefits, life insurance, self-insurance, dental, disability, and long term care insurance, we keep our clients up-to-date with affordable plans that cover all their specific insurance needs.