An entrepreneur’s optimism is a key factor in her success. And yet, that same optimism can sometimes lead business owners to gloss over the troubling “What if…?” questions.
Despite our attempts to control our destiny, life happens. The difference between a successful, long-term business owner and financial ruin may just come down to having a financial safety net in place.
In this two-part blog series, I’ll discuss three ideas to build your safety net.
Protect your family and business with life insurance
Life Insurance is put in place first and foremost to protect those you care about. If you pass away, what do you want to happen with your business? If you are a sole proprietor, you may be fine with the business closure, in which case, you need to only establish the financial value of your future earnings and have the policy to reflect that.
If you are incorporated, you may want a business partner or successor to take over. However, your business shares may transfer to your spouse or children. Do you want them to run the business? Do they want to?
Business owners may therefore set up a crisscross agreement, whereby some or all of the life insurance money goes to a business partner who then buys the shares from the deceased partner’s spouse at a predetermined price.
If you have a key person in your business then you may want to have a key person life insurance policy on them, so that the business can backfill their role with the two or three people and the time it takes to replace them!
Finally, life insurance isn’t only about your business legacy. A permanent policy may be structured to decrease your corporate taxes and increase your cash flow in retirement and benefit you while you are alive!
Stay tuned for Part 2 of this blog where I discuss Disability Insurance, Critical Illness insurance and Business Overhead Insurance.