Meta description: ‘Why do business owners need life insurance?’ is one of the questions we get asked the most at WIS Business Protection, so let’s take a look at the reasons why in more detail.
In insurance, there’s one line that’s fed out repeatedly to try and convince you to bite: if you have other people depending on you (like children or vulnerable adults), then you need a relevant life insurance policy. Yet this line is a classic for a reason, especially when it comes to business owners. Not only do you have a family at home to protect, but you also have your business to think about as well. What happens to your employees if the unthinkable happens to you? At WIS Business Protection, we see the unthinkable play out far too often and we don’t want to see this happen to you, your family or your business. Therefore, our experts have compiled this blog post and will answer the question, why do business owners need relevant life insurance?
What Is Life Insurance?
Business life insurance in the UK is a policy taken out to prepare for the unlikely event of an untimely death or terminal illness. In the face of either of these eventualities, pay-outs to your family mean that they’re well protected when it comes to managing funeral costs, leftover payments such as household bills, or the general loss of income, etc. If you have a business, this is equally as important, as it can stop your company from disassembling in the time after your death so that a successor can carry on. In the event of your death, life insurance will help with paying wages, for example, meaning that no one is left out of pocket.
How Does Life Insurance Work?
Usually, you’ll have to complete a series of lifestyle questions to determine the best policy for your needs. Circumstances such as whether you have suffered from any serious illnesses, if a member of your family has, or if you smoke or not, can have an impact on the type of policy you’re offered. We recommend setting up an insurance policy as soon as you can, as age can also have an influence on the type of coverage you’re provided.
Once agreed upon, you enter into a contract, where you promise to make monthly payments known as a premium. Upon your death, the cash collected from each payment is doled out according to your wishes e.g. between your beneficiaries. Not only is this important for your family, but it can also be important for your business, as it can sustain cash flow and keep your company operating.
Why Do Business Owners Need Life Insurance In Particular?
If you’re a business owner who expects to be running your company right up until the day you die, you need to be responsible and take out life insurance. Despite the added cost, we recommend that you take out a permanent life policy as this generates more protection for your business. This is because the payout date isn’t fixed to a predicted retirement age, but instead covers right up until the day of your death. It’s the more practical insurance type to take out as it ensures that you are completely covered.
If you die unexpectedly, loans or payments you’ve taken out may fall to your company, and this can be quite a burden to have. When a key business member dies, it often isn’t too long before the business left behind dies with them, and often it’s because of loose ends like this that have been left unprotected.
What Can A Business Do With Life Insurance Money After You’ve Died?
After your death, the business life insurance payout can be utilised in many different ways. Not only does it keep the payroll steady for your employees, but it can also benefit your family. If, when you die, you wish to leave your remaining shares to family members, these shares can – if mutually consented to – be bought out by partners or shareholders, giving your family added peace of mind in these distressing times. Payment from your policy can also steady the company until they can find a suitable person to take over your responsibilities, ensuring that the legacy you’ve left behind is well preserved.
For more information on why business owners need life insurance, don’t hesitate to contact a member of our team at WIS Business Protection today.