Businesses Taking Out Life Insurance On Key Employees

According to a new report by Inc, life insurance policies aren’t just for protecting families. They’re helping businesses too. If your business burns down you’re likely protected by insurance. But what if your key employee dies? Life insurance policies are a tool for small businesses who risk losing someone that is key to the success of their company.  “Depending on the type of insurance you purchase, the ownership structure, and beneficiary of the insurance, life insurance can provide financial protection, risk management, and asset protection,” says Josh Patrick, in an Inc report. Patrick is the founding principal in Stage 2 Planning Partners, a financial-planning firm that helps businesses.

These types of insurance policies can help during this time of transition. They can be used to hire new help or just keep the lights on and the doors open, according to experts. “The goal should be if in the event of the death of a major shareholder or other key person that the business can be able to continue with minimal financial interruption,” says Matt Tassey, according to Inc. He’s the past chairman of a nonprofit that helps people make smart insurance decisions. “You can’t do anything about the human interruptions,” Tassey told Inc. “But you can make sure the doors stay open, the light bill gets paid, and the mortgage gets paid.”

Deciding whether to purchase life insurance for your business can be a tough decision. Every business owner knows there are dozens of ways to spend extra money, but it’s important to weigh out the decision carefully. Think about what would happen if the company lost key employees and whether it’s a change the business could survive.  “Insurance is to insure a risk that you can’t afford, so if in your business one of your key people were to die, what would it cost you to replace that person? If you were to die, what is the chance for your business surviving? And what kind of impact would that have on your family?” Patrick told Inc. “If it’s more risk than you can afford, then protect yourself and your business with insurance.”