How Entrepreneurs Can Use Life Insurance to Protect their Business

Entrepreneurs to use life insurance
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If you’ve never thought of how to use life insurance policies and privileges to protect your business, now is the best time to have a rethink. For many entrepreneurs, purchasing life insurance policies for their company executives just isn’t on their buying list. Some think that they do not need it and others mistakenly believe that it is way too costly for their small company size.

Entrepreneurs to use life insurance

Unfortunately, what they do not understand is that it’s not about how big or small the business is that makes it need life insurance coverage but how well you value the lives of the workforce.

However, what these otherwise smart entrepreneurs don’t know is how insurance can greatly benefit their startup firm – no matter the size.

Learn from big corporations how to use life insurance policies to protect your business, its future and that of your family too.

Increase Employee Retention Rates

Large corporations all employ large life insurance policies as a financial motivation to encourage employees to stick with a company instead of job hunting at their competitors.

Top management benefit packages often include this lucrative bonus. The high yield policies are part of the executive’s salary and benefits package.  Managers and their families are attracted and motivated to stay in their position, by these generous incentive packages. You, as an employer, can buy a lot of life insurance coverage for relatively small premiums as a group policy.

Company Tax Deductions

For your key executives, you can increase the value, and their pay package, with a bonus plan that includes payment of their life insurance premiums. This set up is especially advantageous for the employee recipient because they own the policy in full, including the cash value and can assign beneficiary. The premiums you pay are all tax-deductible, reducing your annual tax bill.

Reduce Risk to Company

Daily, entrepreneurs face risk. But you may not be aware of the most serious threat to your firm’s future – the sudden death of a key employee for instance. Should the unthinkable loss occur, losing a colleague and top manager, your company would suffer a loss of revenue and increased expenses to recruit and train their replacement.

Be smart and purchase a life insurance policy on all irreplaceable staff members to pay for these expenditures in the sad event of your employee’s death.

Investment Protection for Partners

What would happen to your business if your partner died? Here is where a particular type of life term insurance called a Buy-Sell Agreement can protect both your firm and your partner’s family.

This legal contract details what would happen to your business if you die or become disabled.   When the buy-sell agreement is financed with life insurance, the policy owner and the surviving business partner uses the funds from the insurance to buy out the deceased partner’s share of the company, benefiting the deceased partner’s family and heirs.

Setting up this financial arrangement ensures that your business, that you worked so long and hard to build, both continues into the future and that your family is compensated.

Now you have learned how large enterprises use life insurance to their benefit, so now is an opportunity for you to use it in protecting your small firm with good life insurance policies so that risk of losing it all entirely will be fully minimized.

This is a guest post from Marsha Kelly. She sold her first business for more than a million dollars. As a serial entrepreneur, she shares business tips, ideas and suggestions on her business blog, Best4Businesses.

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