Deciding on life insurance is not an easy decision. There a multiple factors to take into consideration, including your family and your work. If you own a business, deciding on what type of life insurance policy to get is especially important.
Buying personal life insurance can be different than buying life insurance for work. Although you still consider your family, you also have to think of everyone at work that is dependent on you for their jobs. If you died suddenly, there would be many people that could fall behind in life if it wasn’t for your life insurance plan.
So if you are a business owner and deciding on life insurance, here are few things to consider.
What Type of Policy
Typically, people choose between two common types of policies: term life insurance and permanent life insurance.
Term Life Insurance – As the name says, you purchase this policy for a specified period. You choose the amount of coverage you want, the death benefit and for how long of coverage you want.
There is a drawback to term insurance,however. After the coverage comes to an end, you either let the plan expire (now you have no coverage), or renew it. If you decide to renew the policy, you are now subject to higher rates since the older you are, the more expensive your rates become.
Permanent Life Insurance – Again, as the name says, this policy is permanent. You purchase this policy for life. The other difference is this type of plan has what is called cash value. Your monthly premium payments go towards paying for the insurance and going to the savings-like account. It is an investment that you will always have access to.
The drawback for permanent is it is more expensive that term. The insurer is at higher risk of having to payout the policy. However, since it does not expire, you won’t have to worry about renewing the plan at a higher rate.
Why You Need It
If you are in partnership with someone, having a life insurance policy is critical. If your pattern suddenly died, that loss could be detrimental to the company. The policy could then help cover costs of keeping the business afloat while you decide on a partner replacement or end up buying out the shares from the deceased’s partner.
If you know your partner will be retiring at a specific date, term insurance would be a better option because of the cheaper rates. However, if you and your partner plan to work for as long as possible, permanent would ensure youlifetime coverage.
You can also use life insurance for employees. If you have a highly valued employee that would hurt the company if he or she suddenly passed, a life insurance policy would be able to help. The insurance could cover the costs of losing that employee, as well as the time needed to hire and train someone to take over the position.
So for a business owner, it is critical to purchase a life insurance policy. Without one, your business could be vulnerable to disaster if someone vital to the company died. Search for the best life insurance companies before making a final decision.