I have already discussed some general issuance issues that must be considered when reviewing the Insurance pillar of your business's foundation. The key types of insurance that business owners first may think of when discussing "business insurance" is liability insurance, business interruption coverage, or workers compensation insurance if you have employees. Some professional firms should or must have professional liability insurance. If your business owns any vehicles or requires employees to drive places as part of their job then automobile insurance protection should also be reviewed. If you have spent time reviewing your business needs, hopefully your insurance agent has discussed these types of policies. If not you should review your coverage and meet with your financial, legal and insurance advisors to make sure you have the right coverage so you can run your business with peace of mind.
In this post, I wanted to focus on the importance of the personal aspect of insurance for a business owner. This is an article that gives some background on this as well. My experience is that many business owners really do not consider these types of insurance. It may be that these types of insurance just get overlooked or that some are just considered too expensive. The reality is that small business owners have to consider life and disability insurance to protect both their business and family so they can focus on making their business reach new heights. If you work for a company these things may be taken care of and you just don't worry about it. If you are the business owner you are the one to take care of this.
Life Insurance
Life insurance is insurance that pays out a certain dollar value to a person or entity of your choice when you die. Life insurance can be important for many reasons but I have highlighted a few below. It makes sense to have a policy in place so you can make routine business transactions without having to worry whether you will be approved for a policy or placed in a high premium policy.
- Franchise Business Owners - If you own and operate a franchise, you may be required to obtain a life insurance policy to cover what you would owe the franchisor if you died prematurely. Read your franchise agreement to find out if your franchisor requires this. If you own a franchise or any business and are the sole owner, it's also a good idea to get a life insurance policy so your estate can pay off any expenses.
- Banks and Lenders - If you borrowed money to start your business, the bank or lender where you obtained the loan may request you get a life insurance policy and make them the beneficiary of that policy in the event of your premature death so the entire loan will be paid in full.
- Lease to Own Buildings - If you lease to own the premises where your business sits, the owner of the property may require you to get life insurance and again name them as a beneficiary so the lease to own agreement will be fulfilled in case you die prematurely.
- Partners - If you have a partner and that partner has been the silent investor, or the "money person" so to speak, he or she may require you to obtain a life insurance policy to cover that debt in the event you pass away.
- Large Equipment Expenses - Purchasing large equipment often requires a business owner to finance that equipment. Most equipment retailers have their own financing departments that may require you obtain a life insurance policy with the equipment financing department as the beneficiary in the event of your death.
Disability Insurance
Disability insurance pays you a percentage of your income should you be injured and unable to work. Depending on your premium amount, they can pay up to 66% of you salary until retirement age. There is short term disability (for injuries less than 90 days) and long term disability policies (for injuries greater than 90 days). Disability insurance may be expensive, but if you wait too long you may never qualify. As you age health problems may arise that will keep you from qualifying for these types of policies. If you can qualify make sure your insurance carrier can't drop you if you do develop health issues down the road. Without disability insurance, you may not be able to provide for your family if you are injured.
Conclusion
Part of getting your business foundation in place is making sure you don't have to worry about how things will be taken care of if you die or are injured. These insurance expenses may also be deductible through you business so the real cost may not be as great as you expect. Getting these things in order will give you peace of mind so you can focus on growing your business.