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LIFE INSURANCE

Why Life Insurance is Important For Entrepreneurs?

Sumit Asrani Sumit Asrani 06 November 2017
5.0 (3 votes)

In the midst of the business meets and preparing your elevator speech, don’t forget family, and the ones working towards building your dream company. A smart entrepreneur takes all the contingencies into account – Get life insurance, get going.

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Entrepreneurs are risk takers.

Entrepreneurs do all sort of research and prepare full-fledged business plans. They also plan various strategies to sustain after considering all sort of contingencies into the account.

The risk is calculated one. Always.

But…life is unpredictable.

Thorough market research, product development, meeting with different investors is all fine and good.

But what about life’s uncertainties?

In the absence of an adequate life insurance protection, unexpected eventualities can flip things upside down. An untimely death or suffering from a total permanent disability of a founder, co-founder, or a key person of the business could end it all.

The sun would set before even rising, which may cause your family members to suffer an emotional and financial distress. And your business will be like a wrecked ship without you as its captain. Consequentially, this could result in layoffs, bankruptcy and possible failure of your business and dream.

So…

Be a Real Entrepreneur: Cover Life’s Uncertainty Too

There are young entrepreneurs, traditional business owners, and individuals without a life insurance policy. It implies that entrepreneurs are not thinking about the flip side of all the risk involved in starting and running a business. And also, the risk that life comes with.

A life insurance policy is something that provides a financial aid in case of uncertain eventualities.

As an entrepreneur, you must answer the following questions, if you think life insurance is not important for an entrepreneur:

  • In case, a business owner suffers a total permanent disability or a critical illness who will take the ownership to handle the business? Who will take care of the cash flow or monthly expenses of their family?

  • God forbid, but what if an entrepreneur meets an untimely death, who will run the business and provide the family all the financial support?

Who will support the business, employees and the loved ones, in case of an unforeseen event?

What about the children?

Don’t put your family at risk.

Don’t put your business partners, investors and stakeholders at risk.

A good entrepreneur anticipates all the eventualities. You may have insured your car, bike, home, etc. but what about your beloved family?

After all, ‘family comes first.’

One may also take it for granted to insure the life of oneself and other stakeholders.

This is what happens:

Whenever, one starts a business, most of the time, the entrepreneur puts all the saved money to get the business started and to see it blossoming. Especially, small business owners, SME’s, and start-ups not having enough funding don’t think of providing the life cover to all the Keyman.

Be a real entrepreneur and make sure you take measures to have a life insurance cover for yourself and for key people of the organization.

If you have come so far along the post, you have understood the grave situation.

And if you are planning to take step towards buying life insurance, the next probable question you would ask, what type of life insurance is beneficial for you as an entrepreneur.

Want to know?

Stay with me. And know it all.

What Type of Life Insurance Plan Should an Entrepreneur Buy?

Good question.

A life insurance policy that covers an untimely death. A life insurance policy that will take care of all the liabilities, financial losses that the company may have to face due to the death of the entrepreneur, a plan that supports your family financially.

But what type of life insurance plan covers all, at the lowest premium?

The shortest answer is, a pure life cover – a term insurance plan.

A term insurance plan will take care of all the eventualities that may put the family members and business on the edge or into a financial crisis.

The best part about term insurance plan?

It is customizable. Just like that favorite customized and tailored suit of yours.

How a Term Insurance Plan Will Help You As an Entrepreneur?

You, as an entrepreneur, knows that time is far more precious than anything else. And that risk is at every move of yours. Unfortunate eventualities, due to the loss of a key employee, or a partner, may result into a financial blow. Term insurance will help you to recover financially, so that your business does not suffer. And so does the family members of the life assured.

A term insurance plan comes with a high amount of coverage at a lower premium. Period.

The life assured is covered against death. A term life insurance policy also covers total permanent disability. Few of the term life insurance policies also offer an in-built feature of an additional coverage against critical illnesses.

In case of an unfortunate eventuality a term life insurance will:

  • Provide financial security to the family of the entrepreneur
  • Help in maintaining the lifestyle of family as planned by the entrepreneur
  • Help to repay any loan or debts taken to start and run the business

A brief explanation of a Keyman insurance policy

Keyman life insurance policy is offered by all the life insurance companies.

When you buy this insurance policy, the premium is paid from the account of the company and in an unfortunate event of untimely death, the company receives the coverage amount.

You can buy Keyman insurance policy for key persons of the organization like co-founder(s), other key stakeholders, key people, etc. who are important for the growth of the company’s business.

You must buy Keyman insurance policy for all the main key players of the company, as their loss will result into the huge financial loss. Plus, the cover received can be utilized to find and train the replacement of the Keyman.

Over and above that, if that key person holds the stock of the company, his/her family would legally own these stock post his demise. Now, the company may want to buy these stocks/shares from the deceased’s family and these funds, then can be utilized by deceased's family during their hour of need.

The company can then buy these shares from the sum assured received on filing a death claim of the Keyman. Without having a Keyman insurance policy, company would have to put the money from the company’s pocket to buy back those shares.

When you have a term life insurance and Keyman insurance policy it ensures:

  1. That there’s insurance for the family of the individual that would help the family financially.
  2. That the company has adequate finances to find someone else as a replacement.
  3. That it helps the company to buy all shares back from the family of the deceased.

An untimely death of an entrepreneur, partner or stakeholders may take down the whole business.

Don’t let that happen. Have Life Insurance for all the Keyman working in the organization.

How to proceed further? Or what to do next…?

Evaluate.

When buying a life insurance policy, business owners must evaluate their needs.

Things to Consider When Buying Life Insurance as an Entrepreneur

1. For whom you should buy the life insurance

As an Entrepreneur:

  • Take a life cover for yourself.
  • Take Keyman insurance policies for yourself and for all the other key people working in the organization.

2. Consider the amount of loan you have

Most of the entrepreneurs/business owners take loan to start the business.

Before deciding the sum assured (life insurance coverage) one must take into account the amount of loan taken. This way, you as an entrepreneur, are making sure that your family doesn’t end up paying your liability for the life time or bear all the burden in case of your passing away. And at the same time, you are making sure that company doesn’t fail because of the financial blow.

When you are covered under the life insurance policy, the loan will be paid from the coverage of the policy. Ensure the loan amount is taken into consideration while determining your sum assured.

3. Must buy an adequate life cover

Most of the time, the individuals are not sure about how much coverage is sufficient. One must consider the amount that would be sufficient for their family to continue living their lifestyle post their demise, in which case, it is advisable to opt for 15-20 times the annual income.

If you are getting covered under Keyman insurance policies, consider the amount that would help the business to continue without facing any major financial losses. If you hold shares, consider that too.

What Not To Do As an Entrepreneur When Buying Life Insurance Policy?

Don’t stay underinsured. Because what could be worse, if the sum assured received by the company or family members is insufficient?

If you are not sure, it is better to seek advice from an expert to guide you. It is better to consult than buying a life insurance policy that does not fulfill your requirement.

No two business are the same, no two business owners are the same, and so each entrepreneur must take time to figure out an adequate amount of cover to get a customized life insurance as an entrepreneur.

Question You Must Ask As an Entrepreneur: Cover or No Cover?

When you have already decided to go all the way as an entrepreneur, risk coverage is a must. Protect your family, protect your business from dooming. Get cover, get going.

Would you ever like your family to face financial hardships post your demise? Don’t you want them to live a comfortable lifestyle even when you aren’t around?

Be agile. But take necessary steps now to provide financial security to your family, and the dream company you are building.

Everything can be taken care of, the question is Cover or No Cover.

Once you decide to go for a coverage, you are deciding that yes, family matters. Yes, the company matters and so does all the key people working towards building a dream company.

Give peace of mind to your family, to the company stakeholders; don't put off life insurance cover for later. Time is ticking.

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5.0 (3 votes)
Sumit Asrani
Written by Sumit Asrani
He's a writer. His blood cells are woven with Hypergraphia, as he breathes in books, he exhales words and sneezes poetry. Captivated by the web-of-words he's trying to escape miraculously as a content writer at Coverfox.com.