Putting up a new business is a tough job to fulfill – you will surely face a lot of challenges as a beginner. There is no assurance on how far your business can go most especially if you are in the very competitive market. This is why, among other important things, you must not forget to work to secure term life insurance policy for your business.
There are a number of compelling reasons why you must buy an insurance policy that is ideal for your business model. Term life insurance is considered a better option for business protection. It can be used for the following:
- Collateral for loans – this is useful most especially if you do not have an established credit and assets yet. An insurance policy can help you secure collateral for a loan that can help cultivate your business with the needed finances during its crucial time. You can just pay it off on whatever schedule you have agreed to.
- Key person insurance – who is this key person? This can be yourself, your business partner or any member who plays an important role for your business. You can protect your business by taking out a term life insurance policy on the key man and assume the role of beneficiary. For instance, if your business partner is the key person and he dies suddenly, as a beneficiary, you can make use of the proceeds to keep the business afloat or to decide to liquidate, have a graceful exit, and move on. Key person insurance can help prevent possible business chaos following the passing of a key member.
- Buy-sell agreement – supposing one business member (co-owner) suddenly dies, what happens to that ownership then? Typically, his share will be passed to his family member who might or might not be interested in helping the business grow. With buy-sell agreement, potential conflict can be avoided. Other members can buy that share with a certain amount and this can be obtained by taking out a life insurance policy that stands ready to provide the needed funds to facilitate the buyout of that share.
- Leveraging your accounts receivable – What if you don’t have the liquid assets to buy a policy because you are all tied up in your business, real estate and so forth – how can you buy an insurance policy? Term life insurance policy can be obtained by leveraging your company’s accounts receivable – insurance companies consider it as a qualifying asset for loan.