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When you own and operate a business the importance of life insurance cannot be stressed enough. It is an area of future planning that many people take advantage of because their employers automatically deduct, and sometimes pay into, a policy that is already set up for them. As a business owner, you do not have that luxury. You will need to contact your insurance agent or find one, that can get you into a policy that fits your lifestyle and also doesn’t break the bank.
Business owners often overlook this step. Some think they will get it after their business is off the ground. Or that they will not need it because they will have enough money built up from the business when they pass away. These cases may be true, but no matter how well you do, or how long it takes to become successful, a life insurance policy is a good idea to get from the start.
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1. Income Replacement
The income that you bring home for your family will need to be replaced. If you have a big enough policy, then your loved ones may not have to worry about taking over the task of surviving at home. If you have a smaller policy, they will have enough to get by until they figure out a way to work things out. Whether it is to sell the business or keep it running, they will need some time to get life back on track. A life insurance policy, no matter what size, offers this to them.
2. Debt Protection
Your debt, from the business and your personal life, will need to be paid off even after your death, otherwise, the family will more than likely lose the business and all the employment and income that it provides. An Australian life insurance policy should be enough to cover the payments or to pay the debt off completely. When buying the policy this is an aspect of planning that you should include when purchasing the policy.
3. Funeral Expenses
The funeral expenses can come with a very heavy price tag. A policy will easily cover these expenses, so your family and friends do not have to worry about paying for the cost out of their own pockets. During this time of grief and healing, they should never have to worry about this expense.
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4. Collateral Coverage
This should be included in your policy to cover current or past debts of the business. Until they get the money from selling or get their feet moving with running the business, bills must be paid. You do not want all the hard work that you have put into your company to go down in flames within the first few months.
5. Grow Wealth
One of the aspects of a life insurance policy that you may not have thought about is wealth. You grow wealth tax-free. It is basically retirement income that grows as you put money into it. It can also be a place to acquire a tax-free loan if money gets tight.
Life insurance should be one of the first things you think about when starting up a business. Your loved ones should not have to deal with business issues while they are grieving over your passing. Two people from the UK and Norway, Professor Sasha O. Becker from the University of Warwick and Professor Hans K. Hvide from the University of Bergen, conducted a study that you might find upsetting.
They found that after the main owner or founder of a business dies the sales within a few years plunged down 60%, and employment retention dipped down by 16%. Without a policy, in place, these numbers show that your family could very well be in a bad financial situation when you pass.