With the uncertainties of life, things can unexpectedly turn upside down. Thus, it is very important for every business owner to have life insurance. Besides this, there are various other reasons why it is quintessential for business owners to make an investment in a life insurance policy.
In a constantly fluctuating market, one needs to have a substantial amount of money to keep a business running. Without proper planning, the assets of a company can liquidate, especially with an uncertain demise of the business owner. This can ultimately result in the forced selling of the business, or with the family of the owner stuck paying pending debts. Therefore, the best way one can avoid these circumstances is to invest in a life insurance plan. A life insurance plans protect the business financially if the owner passes away, and along with that, it protects the owner’s family, workers and others impacted by the business.
How does Life Insurance Works?
In case the insured dies during the tenure of the policy, then the business will be entitled to gain the benefits of the policy. Hence, a life insurance plan owned by a company is one of the best ways to help the company deal with the financial problems in case a key individual, such as the owner, passes away. Let’s take a look at the other advantages of having a life insurance for business owners.
- Keeps the Business Running
In case of the business owner’s death, a business can be impacted adversely – in many cases the company’s operation can even cease while the survivors try to figure things out. In such case, the benefits offered by the life insurance plan can help the company to pay debts like utility bills, rent and also deal with the lost revenues and salaries of the employees.
- Secure Families with Regular Income
The company owned life insurance plan secures the family of the business owner by replacing the lost income and helps them to maintain a good lifestyle. Moreover, it also takes care of the loan and debts so that the family of the owner may not have to suffer by paying the debts.
- Financing Buy-Sell Agreement
A buy-sell agreement is very useful for Private Corporation or partnership. The premium of the life insurance plan is paid by the business on behalf of each of its owners on condition that, in case of demise of the any of the partner, the other partner will use the benefits of life insurance plan to purchase the share of the company of the deceased owner. This stops the business from getting into a loss or falling into the hands of others who are not involved in the operations of the business.
- Provides Tax Benefits
There are different tax exemptions associated with life insurance plans. The premium paid towards the life insurance policy, and the claims made, are eligible for tax exemptions under the different sections of the Income Tax Act.
Wrapping it up
A business owner should consider purchasing a life insurance plan that covers unexpected death and will take care of the financial losses of the company and other liabilities. Moreover, it is also important to keep in mind that the life insurance plan should provide financial coverage for the family too.
The availability and cost of life insurance for individuals who own a business depends on factors like the type of coverage needed, age, health, etc. Before zeroing in on a particular life insurance, it is very important to make sure that the policy buyer is eligible for insurance as he/she will be liable to take care of the costs related to life insurance. The owner of a business should also consider other aspects like fees, contract limitations, expense rate and charges including mortality. In addition, it is also important to keep in mind the income tax implication and surrender charges of the policy in advance.