Reasons Your Business Needs Life Insurance
Life insurance policies come with a wide array of benefits, not limited to families alone. Such policies also play a significant role in protecting businesses and ensuring their continued operation should the inevitable come to pass. For small businesses, life insurance is paramount to future planning.
Life insurance can come in handy in helping businesses break free from traditional bank loans as well as benefit employees and generate tax advantages.
Below are some of the reasons why any serious business owner should consider buying life insurance coverage.
Attract and Retain Employees
Successful businesses have used life insurance policies to attract and retain key employees. Financial incentives such as 'golden handcuffs' are often used to encourage essential employees such as management to stay. Employees are also often drawn to these incentive packages.
Similarly, life insurance policies provide businesses with a way of covering losses that might come about on the passing away of an important employee. The death benefit paid in this case can go a long way in financing the hiring of another employee to replace the departed one. The death benefit can also go a long way in settling some of the losses incurred on the disruption of business operations.
Unknown to most people is that a business can enjoy tax benefits on taking life insurance on important employees. Even as business rewards employees with life insurance in a bid to keep them, they also stand a fair chance to benefit in return.
An executive plan is a simple life insurance plan that involves businesses compensating employees by paying premiums to life insurance policies they have control over. Employees cherish such policies because they own them.
Conversely, employers benefit from the fact that any premiums made to the employee’s life insurance plans are tax-deductible, which significantly reduces the amount of taxes paid on income.
Life insurance coverage goes a long way in minimizing the impact of some of the risks that a business is exposed to. For instance, businesses spend vast sums of money in hiring and training employees, especially those in higher management levels. Should the inevitable happen and an employee passes on or quits then, crucial operations might come to a halt leading to substantial loss of revenues.
Companies take life insurance to protect themselves against such risks. The financial benefit paid should an unfortunate event happen, can help offset any loss of revenue or cost that a business might incur. Similarly, the financial benefit can help the business finance a hiring process in pursuit of a worthy replacement.
Protect a Business
People take life insurance policies as a way of leaving their beneficiaries something behind upon passing way. Similarly, a death benefit paid upon the passing of a business owner or a partner can go a long way in supporting the business during the trying times.
The death benefit can go a long way in settling any debts that the business had. In the case of a business, a partnership with the remaining partner can use the death benefit to buy out the deceased partner stakes in the business.
Life insurance is paramount to the success of any business. The financial benefits that such policies come with can help beneficiaries settle any outstanding debts emanating from business operations. Similarly, remaining partners in a business can use the financial benefit to buy out the business upon the passing away of one of the partners.
Also, life insurance can help protect a business against the death of critically important employees. Tax deductions on offer are another reason to consider life insurance in a business setting.