You’ve built your small business from the ground up. You’ve become successful at offering your services and/or products to your clientele. But are you properly protected should the unthinkable happen?
As a small business owner the single most important insurance coverage you should purchase (besides general liability) is life insurance for small business owners. Without this type of insurance coverage your business may suffer from a one-two punch.
Types of Life Insurance for Small Business Owners
Here we discuss the two types of life insurance for small business owners that you can – and most definitely should – invest in. They are term and universal.
Term Insurance – This option is relatively simple to understand. You choose a specified amount of coverage – how much your heirs will inherit – and the length of the “term.”
Most policies can be in place for anywhere between 10 and 30 years. The downsides to this type of life insurance are that once your specified term is over, you may be left without any coverage, and that it gets pricier as you age.
Universal Insurance – Universal insurance (a type of permanent insurance) is somewhat similar to term insurance, except for the fact that it offers an investment component, also known as a “cash value”.
Unlike term insurance, half of your monthly premiums go towards the insurance part of the policy, while the other half goes towards the investment part. Should the need ever arise; you can borrow against this investment.
The downside to universal insurance is unfortunately the cost. But while it is more expensive than term insurance the policy stays in place for the entire duration of your life – that is as long as you stay current.
How Much To Purchase?
When making the determination of how much life insurance for small business owners you should purchase, no matter the type, it is advisable that you ask yourself the following 4 pertinent questions:
- Do you have any debt? How much?
- What is your present and future earning potential?
- What do you anticipate your future expenses will cost?
- How much will it cost to keep your company operating?
All small business owners should seek out the help of a highly qualified insurance professional prior to determining how much life insurance for small business owners they should purchase. They can look at your needs and assess just how much you’ll need.