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If you run a small business with one or more partners, what should be your priority? Checking to see if your operating agreement is set up? Your budget? Your business plan? While these are all important, many business partners don’t realize that essential life insurance should be at the top of your priority list. This type of insurance is designed to protect your business in the event that one of your partners passes away and can provide a financial safety net that can prevent your business from collapsing in hard times. Let’s take a look at how critical life insurance works and why it’s so important for small businesses.
What is critical life insurance?
Key life insurance is a life insurance policy that a company buys for the life of an owner, top executive or other critical employee. Critical life insurance provides protection in the event of the death, disability or critical illness of a business partner — without which your small business could be vulnerable.
The money from this policy can be used to buy out the deceased partner’s share in the business. This way, surviving partners can continue to manage it without having to worry about dealing with their deceased partner’s assets or challenging the ownership rights of family members. In addition, it can also be used to help companies compensate for lost income while they search for a replacement staff member.
Why is this important for small businesses?
For small businesses, key life insurance can be a lifesaver if one of its owners dies suddenly. Without this cover, the surviving partners may have to struggle to come up with the funds to replace their lost partner’s share or lost income to keep their business afloat. This could mean taking out loans or selling off assets, which could further jeopardize their financial health. Key-life insurance ensures that the surviving partners do not have to worry about these issues and can instead focus on keeping their business successful.
Key-life insurance can provide peace of mind knowing that if something were to happen to you or your partner, the remaining owner would be financially secure and have the resources needed to maintain the business and meet financial obligations. This type of policy also offers a buy/sell agreement that allows one partner’s interest in the business to be sold or transferred in the event of death, disability or critical illness. In addition, key life insurance policies offer tax benefits and can help with succession planning.
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How to get a policy?
The process of obtaining key life insurance is relatively simple. First, you will need to assess how much coverage will be needed for your particular situation. This will depend on factors such as how much each partner owns in the company, what assets need to be bought back, or how much income needs to be replaced. Once you’ve determined this amount, you’ll need to look for an insurer that offers coverage up to that limit. Finally, you will need to complete all the paperwork required by your chosen insurer and pay any premiums due before you will be fully covered by the new policy.
No matter what size or type of business you’re running with a partner or partners, the most important thing is to make sure you’re all protected if something happens. Key life insurance can provide peace of mind knowing that if something ever happens, a financial safety net will be available. It also allows business owners the time and resources needed to properly grieve without adding additional stressors during such a difficult time. Make sure essential life insurance is part of your business protection plan today.
Our pick of the best life insurance companies
Life insurance is essential if you have people who depend on you. We’ve combed through the options and developed a list of best-in-class life insurance. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.
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