Your business is an extension of yourself, and you’ve worked hard to provide for your employees and their families.
But, what would happen to your business and your family if you passed away? Would your business be able to go on and grow without you, or would your business partners be forced to shut the doors?
Long-standing brands pass the test of time by shifting ownership when needed to keep their company afloat. If you own a business, or are thinking about starting one, you should consider getting your business insured to prepare for the unexpected.
Getting your company started
Getting a business up and running usually requires some amount of capital. To secure this funding, many entrepreneurs obtain a Small Business Association loan, which is commonly referred to as an SBA loan. These loans were created to help businesses that haven’t established the traditional “credit” that most banks or lenders require.
SBA loans provide the business owners with below-market rate funding to acquire physical assets like real estate and equipment. Unlike traditional bank loans, however, SBA loans require collateralization or life insurance. This ensures that your lender will be repaid if you pass away before you have paid off your loan. Collateralizing an SBA loan with no exam life insurance is the best option for most people, especially if you need a fast approval to secure your funding.
Traditional life insurance can take 6 to 8 weeks to get approved, and this can really slow down your business goals. With no exam life insurance, instead of meeting with a nurse to complete an exam, the life insurance companies can electronically review your prescription history and medical records in just a few minutes. In fact, some companies can approve your application and issue your policy in as little as 15 minutes.
Term life insurance is always the best choice for collateralizing a loan, especially an SBA loan. You can customize your policy to match the terms of your loan, and term insurance is more affordable than other types of coverage. SBA loans usually require a 10-year term, and your policy’s “face amount” needs to match the amount of the loan.
Securing a buy-sell agreement
If you have already established your business and you have two or more owners, you should set up a buy-sell agreement. Buy-sell agreements are commonly funded with life insurance, and they are created to divide a company among its shareholders in the event of an owner passing away. This prevents the company from being forced to sell, and it keeps the deceased owner’s spouse from becoming involved in the business.
A buy-sell agreement can provide funding to secure your company’s legacy while also ensuring that you and your partners will have options if one of you were to pass away unexpectedly. To establish a buy-sell agreement, each business owner need to purchase a life insurance policy with a death benefit that is equal to their share of the business.
Most businesses choose to fund their agreements with a 20-year term to set themselves up for the future, but your life insurance should be re-evaluated every two to three years. So if you are young and healthy, you may be able to save a little money in the short-run by buying a 10-year term instead.