As a business owner, you likely started with a dream, and then put in years of planning and a significant investment, both financial and emotional. When you're busy running your business, it's easy to put off thinking about what would happen if the unexpected occurs.
Consider personal life insurance for your family's security
If you have a family, start by protecting them first. How would your family survive without your income? Would they be able to make ends meet, maintain their current lifestyle and continue their plans for the future? Personal life insurance is an affordable way to provide for your family and your spouse in the event of your death. Term life insurance can be a simple way to get started and to cover the early years when money might be tight.
Who else depends on you?
For business owners, the "family" for which you're responsible can include more than just your spouse and children. If your business depends on you, would it collapse or suffer without you? Do your employees depend on you for their livelihood? Life insurance can be earmarked to support the business and ensure it can continue.
If you have business partners, would they be able to buy you out, giving your heirs the full value of your contribution? Life insurance can be an important component of your business continuation plan. If you or another partner should die, the proceeds can provide enough capital to keep the business going while restructuring, or to buy out his or her survivors without depleting cash reserves or incurring debt.
Protecting the business with key person insurance
If the sudden loss of other key employees would disrupt the business, you should consider key person insurance. For example, if certain employees generate a significant portion of the company's revenue by their efforts or expertise, life insurance on those employees can provide economic protection for the company's future. That life insurance also can be passed onto the employee as a retirement benefit.1
Passing the business on
Life insurance also can be used to fund a business succession strategy that allows you to retire comfortably while ensuring the future of the business for your successors. For a family business, life insurance can provide a fair way to split the business between active and non-active heirs.
Additional tax benefits for business life insurance policies
When life insurance is used as a business benefit paid on owners or key employees, it is not subject to corporate income tax.2,3 Plus, cash values are an asset on your balance sheet, and those policy cash values and any related dividends4 can be accessed if needed.
To explore all the ways life insurance can help you protect the business you've worked years to build, talk with a local Farm Bureau agent today.
1This option may result in income-tax consequences to the employee.
2Key person strategy life insurance death proceeds may be subject to AMT for a C corporation.
3Neither the Company nor its agents give tax, accounting or legal advice. Please consult your professional adviser in these areas.
4The life insurance policy cash values may be subject to surrender charges, and the death benefit will be reduced by any loans or withdrawals.