Complete financial wellbeing encompasses investments and insurance. There are many kinds of insurance that may be beneficial to you.
The Who, What, When, and Why of Insurance
Without planning, on the death of your business partner, the deceased partner’s spouse or heirs may automatically become your new partners. If you don’t want them as partners, owning life insurance on your fellow shareholder is a way for you to have the funds to buy the shares from them. A good shareholders’ agreement needs to be in place for this to work, and the right type of insurance is an important part of making this happen. Your partner can do the same to make sure that he or she does not find themselves with your heirs as partners.
Other ways you can protect your business using insurance is to purchase “key person” insurance which would provide cash to the business in the event of the death of a key employee. That key person might be you just as it was for me when I had my schools, or it could be the general manager of the company, the COO, etc.
Insurance is also important in our personal lives. Couples with mortgages usually wish to insure the lives of both spouses so that if one passes away, there is enough money to pay off the mortgage and keep the family home. However, beware of the insurance offered by your bank when you take out the mortgage: it can be quite restrictive and only lasts as long as the mortgage. Moreover, the bank (not you or your spouse) is the beneficiary and the policy itself can be changed or cancelled at any time.
Often for the same or similar amount of money, you can purchase your own insurance policy and can set the parameters. If you take good care of your health your own insurance may be better priced than the banks. That is because the premiums on your own policy will be based on your age, health and smoking status, whereas the bank premiums are based on the general population.
As a business owner, you are your greatest asset. Are you protecting yourself with an individually owned Disability policy that provides income should you not be able to work for a time? A lack of the right insurance can mean using up investments that are supposed to be there for retirement.
Whether business or personal, you can protect yourself and your loved ones with the right type and amount of insurance.