Why the Self-Employed Really Need Life Insurance

So, you’ve started your own business. Things are going well. You even tackled the all-important issue of ensuring your family has health insurance – something none of us should be without. Congratulations, you’ve achieved the American Dream!

But, have you really addressed all the issues business owners should address? Have you purchased a life insurance policy? Let’s take a look at some reasons why life insurance is more critical for the self-employed than for the salaried individual.

Your Family is Left Behind to Pick up the Pieces

Whether the plan is for your family to continue the business after your death or sell it, there are loose ends to be tied up. During this transition period, they’ll need additional capital to ensure things go smoothly.

Let’s consider this for a moment. As the business owner, you offer invaluable skills; skills that are instrumental to the company’s success. Your administrative duties include more than just writing checks for bills each month. You’re in charge of sales and marketing and have forged strong relationships with local distributors. If your family and/or business partners lack these necessary skills, hiring an experienced outsider could mean the difference between the business’ success or failure.

Plan on selling the business upon your death? A life insurance policy can help keep the business afloat while the details are being settled.

Are There Business Loans to Be Paid Off?

If you’re like most entrepreneurs, you probably took out a small loan when opening your business. It’s a great way to raise enough capital safely and quickly. What will happen to that loan should you die unexpectedly?

If the banks wrote off a loan every time the borrower passes away, they would be out of business in no time. To protect their investment, many lenders require individuals to secure a life insurance policy for the full amount of the loan as part of the loan requirement. Even if this wasn’t a requirement for your loan, it’s a great strategy for ensuring your debts are paid once you’re gone, and that your loved ones don’t sacrifice in the process.

Key Person Coverage Protects Your Business Partners

Handling the business’ affairs after your death will be difficult. Your family must make critical decisions, all while trying to deal with the emotions of losing a loved one. Add business partners to the mix and you have a potential recipe for disaster.

The simplest way to move forward is for your partner(s) to take over the business, offering your family an agreed-upon price. The company continues to run smoothly and your family receives additional money to help them get back on their feet. The most effective way to handle this strategy is for each partner to maintain key man life insurance, with the other partners named as beneficiaries. When one partner passes, the surviving partners use the death benefit to buy out the deceased partner’s share.

Make sure you research more than a few insurance agents and their business practices, when looking for a new policy. As with most critical life decisions, you want to make sure you have options and can find the best fit for your individual needs. It’s also important to gauge the interest of the agent and relative pricing of the plans you’re considering.