As a small business owner, you’ve got a lot on your plate. With the daily checklists, the monthly milestones, and the annual sales goals (not to mention having a personal life), do you ever wonder, “when should I consider life insurance? Is there a ‘right’ time?”
Here are a few key questions to ask yourself so that you can decide when is the best time for you:
Do I need a business loan now or will I need one in the near future?
Are you in growth mode, and considering a loan to expand, purchase equipment, hire additional staff, or cover other operational costs? In certain situations, assigning a life insurance policy as collateral may be viewed favorably by a lender and could, depending on the broader credit profile, contribute to more flexible loan terms.
Here’s how it could work: In some cases, lenders may allow a life insurance policy to be assigned as collateral. This means that if the insured individual dies before the loan is repaid, policy proceeds may be used to satisfy the outstanding balance. This structure can provide additional security to the lender and, depending on the circumstances, may support more favorable loan terms.
Will my company be ok if I’m not here?
If you’re integral to your business’s success (and let’s be honest, what business owner isn’t?), life insurance can help ensure your company continues to operate if something happens to you. This can be structured in various ways, like a buy-sell agreement, to provide the necessary funds to keep things running smoothly without disruption.
What’s a buy-sell agreement? A buy-sell agreement is a legal arrangement among business owners that establishes how ownership interests are transferred upon certain triggering events, such as death. Life insurance can be used to fund the purchase of a departing owner’s interest, helping support continuity and ownership stability.
Will my company be ok if one of my key players is not here?
On the same token, if you have a partner or key player on your team integral to your success, such as the top salesperson, creative genius, or the tech guru, key person insurance can be considered.
What’s key person insurance? This is a life insurance policy taken out on an individual who plays a crucial role in the business’s success. If something happens to that person, the life insurance payout can help offset the financial impact on the business, like finding a replacement or covering any lost revenue.
On a personal note, is my family growing?
With any addition of a “plus one” – such as a marriage or the birth of a child – life insurance is an important consideration. You want your family to be taken care of, and life insurance can help provide added financial security and peace of mind.
Is my birthday coming up?
Life insurance premiums are generally influenced by age and health at the time of purchase. As a result, costs may increase over time. Evaluating options earlier may provide greater flexibility in coverage and pricing.
Final Thoughts: When it comes to life insurance, there is no one size fits all answer. So, regardless of what you decide, knowledge is power.