What’s the first thing that comes to your mind when you hear the words ‘life insurance’? We bet it’s the need to protect your loved ones financially, right? Most of us consider life insurance vital especially entrepreneurs, more so if we have a family that would struggle if we were to pass away or fall ill for an extended period.
But what if we told you that you can safeguard both your business and your family’s interests with life insurance for the self-employed? Yes, this policy helps to protect your income should you fall ill, get injured, or unable to work.
Still not convinced? You’ll probably change your mind after reading this post. Inside, we explain five reasons entrepreneurs should consider life insurance.
Table of Contents
Collateral for a loan
As a business owner, it’s not uncommon to need external financial support to expand your scope, acquire more advanced equipment, maintain cash flow and meet working capital requirements. But to obtain such loans, most lenders require that you put a life insurance policy as collateral to guarantee that they will get back their money back in the event you pass away.
Essentially, if you need a loan and have a life insurance policy, you’ll need to sign with the insurer and the lender that should you leave before repaying the full amount, your benefits will be given to the lender first and the rest to your beneficiaries.
Unlike public limited companies, small businesses and partnerships may be forced to dissolve if the owner or one of the partners or key person passes away. But the good news is, life insurance for entrepreneurs can keep the business afloat even if the founders are no longer around.
Suppose you had a unique skill or expertise that can be hard to replace in case you pass away. If that happens, your surviving business partners could use the policy’s payout to cover the lost revenues and keep the business functional while they look for a perfect replacement. Likewise, life insurance can come in handy if you or some of your partners guarantee loans for your business.
Protection from Bankruptcy
It’s every entrepreneur’s instinct and wish to want their business to keep going strong long after they are gone. To be able to achieve this feat, it’s important to have a solid financial plan in place. Taking out a life insurance policy is a good place to start.
This cover can come in handy when your business faces the risk of going bankrupt. For example, if you had taken unprotected loans before departing, lenders may come knocking in an attempt to recover their money. In this case, your family or business partners may use the policy’s payout to offset the loans without touching the company’s capital or liquidating its assets.
Although life insurance for entrepreneurs may lean more towards serving the business’ interests, it protects the insured’s family as well. If your family is 100% dependent on your income, they may be left financially unprotected upon your passing away.
Sure, proceeds from the life insurance cover may first go towards fulfilling business needs, but your family can also use what’s left to cater for their needs. This ensures that your business continues to run while your loved ones can maintain the same lifestyle long after you’re gone.
Peace of Mind
If you love your peace of mind, then you should consider taking out life insurance. Knowing that your business and family will remain protected no matter what happens gives you the confidence to face the future stress-free.
With the right life plan, you can rest assured that your business will remain functional and with adequate capital regardless of whether you pass away or fall ill and are unable to work.
Over to You!
Life insurance for entrepreneurs is an invaluable asset that enhances growth, continuity, flexibility, and security when utilized adequately. Remember, you can leverage it to secure a business loan, protect against liquidation, protect your family, and enjoy more peace of mind knowing that everything will carry on as usual even if you were to pass away.
What makes you hesitant to take out a life cover? Let us know your thoughts and feedback in the comments below!