The Importance of Business Life Insurance

We all understand that life insurance is essential for the security of your family, but it is often even more important for business owners to earmark a life insurance policy for their business.

Business life insurance provides your company with a layer of financial stability in the event of the death of an owner, partner, or key employee. In the simplest terms, it helps to ensure that the business can continue following that death. Business life insurance provides income replacement and protects the future of the company.

It is important to ask yourself whether your company could continue to thrive if you were to die prematurely. Additionally, it is important to evaluate whether there are other key people within your company whose death would significantly impact the ability to conduct business.

Term Life Insurance VS Permanent Life Insurance

There are two major types of business life insurance policies to consider, and the type of policy you choose will depend on your specific business needs.

Term Life Insurance – This type of policy provides coverage for a specific amount of time, or a term. For example, a business may purchase a policy with a $500,000 benefit for a term of 20 years. This means that the company pays the policy premium for the duration of the term, and the company only receives the benefit if the covered individual dies during that time. Otherwise, at the end of the term, the policy is closed.

A term life insurance policy works particularly well if an owner, partner, or key employee has an intended retirement date in the future or if that individual plans to be with the business for a specific amount of time.

Permanent Life Insurance – This type of policy provides life-long insurance coverage and an investment component, generally referred to a cash value. While this type of policy is significantly more expensive, part of the premium goes toward paying for the policy and the other part goes toward the investment component. This means that unlike a term life insurance policy, if you decide to discontinue your policy prior to your death, you will receive the cash value benefit.

A permanent life insurance policy may be better suited for companies with partners that plan to continue working together indefinitely.

Which Coverage Fits My Needs

The goal of a business life insurance policy is to provide some financial stability, so business owners are able to recover after the loss of an essential person. Perhaps it provides the time to find someone who can replace the deceased within the company, or maybe the benefit will be used to purchase the deceased’s portion of the company from his or her heirs. Regardless, the type of policy and amount of the benefit will depend on your unique circumstances.

Your Clemente Insurance Professional works with you and your partners to develop business insurance solutions that fit within your company’s needs and budget. Contact Your Insurance Experts at Clemente Insurance and Financial Services by calling (888) 995-9098.

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