Income and life insurance can help you avoid making out-of-pocket payments to support your business operations. They’ll take up financial responsibilities, such as paying bills and settling payroll, in case of unforeseen events. They provide a lifeline for your business by fixing your running costs.
Small businesses can leverage such a financial protective strategy to remain competitive in the market. It’ll guarantee consistent business operations while you adjust to financial gaps. However, insurance is a vast subject, and you may need professional guidance to select the appropriate cover for your business. Financial advisers can review your business goals and insurance needs and provide helpful resources for choosing the best cover for your company.
Here’s why small business owners should consider buying income and life insurance.
- Safeguarding Your Business Future
The combination of income and life insurance directly connects with the business’s future. It helps you plan for eventualities, such as the owner’s death, that can significantly affect the company. If it happens, the business and the beneficiaries can receive a lump-sum payment from the insurance company to support the financial needs, such as upkeep or running the payroll.
In addition, the insurance package will shield the partners from dealing with creditors. They can use the insurance claims settlement to pay debts and continue running the business.
- Access To Credit Facilities
Lenders or creditors typically ask for business insurance to assess your creditworthiness. They must ensure you can repay the loans extended to your business whenever they’re due. The lender may approve the business loan if you have a term policy to support your credit facility application.
An income cover will cater to your business’s brief suspension of cash flow. And it can be an added advantage to your loan application. Mostly, private lenders look for surety from your company before approving loans. So, it’s advisable to have an income and life insurance policy to have a robust financial wall around your business.
- Business Maintenance And Collateral
The cost of starting and running a business can mean digging deeper into your account. You’ll have a tough time sustaining the business operations from your pocket and collecting revenue from the establishment. The business can easily suffer if you cannot raise money for its upkeep. Soon, you might have to close the shop or look for other sources of income.
Income and life insurance can protect you from such eventualities. The insurance policies will ensure that you continue running your business without cash flow issues.
Moreover, your business will have collateral for access to credit facilities, such as loans or ‘buy now, pay later.’ The lender may let you borrow up to 90% of your life insurance policy’s cash value.
- Business Share Disposal
A term policy can be the best option to add to your business if you have a business partner. It’ll cover the financial gap if you or your partner dies.
Furthermore, it simplifies share disposal because the partner can buy out the deceased shareholder and pay a lump sum to the beneficiaries listed or mentioned in the business. The income protection policy will ensure that the company’s overheads are taken care of. Thus, the business can continue to operate as expected.
- Tax Benefits
Income and life insurance policies can have a tax-free effect on the business taxation regime. You can declare the insurance policies in your business and collect the accrued relief from your tax office. You can reinvest such tax benefits to assist with running your business.
However, it’s crucial to consult your insurance provider and a professional tax officer to get more information. It’ll help you learn the premium you can pay and what the business can gain from buying income and life insurance.
- Asset Diversification
Apart from insurance providing a safety net for your business, it can be a great way to diversify your portfolio. If you’re in a partnership, the company can use the life insurance policy to disburse dividends to shareholders.
In addition, you’ll be able to manage cash flow in the business by withdrawing funds accrued through the insurance. Moreover, you can use the income policy claims to finance the premium paid to life insurance.
The insurance landscape can be challenging if you don’t understand what policies to buy for your business. You must review your business goals and decide which insurance policy suits your establishment.
Income and life insurance are ideal for long-term plans that protect your company from financial hardship. However, you may need to consult a financial adviser to remove all the guesswork around buying insurance for your small business.