Business Protection

Whether you’re self-employed, own your own business or are a partner in a business, life insurance will:

• Minimize the financial impact of your death on your business and your family
• Keep your business plans on track

It provides a one-time,tax-free payout for your business if you, your business partner or key employees die. This money can be used to pay off outstanding loans or to buy out the share of a deceased partner, which is an essential part of funding a good buy-sell/shareholder agreement among shareholders. Without this source of funding, you could be compelled to work with the survivors of a deceased partner who may not have the same passion or ability to take the business forward. Some plans even allow an increase in your coverage based on the market value of your share of the business during the first 10 years after the policy is issued.

Loan protection. Often in small businesses, lenders will require that loans be personally guaranteed by the owner. In some cases, lenders may also require life insurance for key people for the duration of the loan.  Even when lenders don’t require life insurance, it’s good practice to have it. A personal guarantee becomes a liability of the person’s estate meaning the estate could be held liable for outstanding debts that the business cannot pay. Having life insurance can also improve a business’ ability to obtain financing.

Although Term Insurance on the lives of business owners & key employees can take care of the above needs at a low cost but if cash flow allows, Permanent insurance can provide added benefits especially when retained earnings are generating passive income which is getting taxed at the highest rates. The same money if invested in a whole life corporate owned insurance grows tax sheltered and can be potentially paid out to the beneficiaries, virtually tax free, through the Capital Dividend account of the corporation.  This can be a tax-efficient way to help transfer assets out of the business. Moreover, the cash value that builds up over time inside such a whole life policy can be leveraged for corporate investment or to fund retirement planning of business owners.

On similar lines the business also needs protection against critical illness or disability of its owners or key employees. Insurance helps ease the financial impact if you or a key person in your business becomes seriously ill or injured. It can be bought individually or as part of a group plan for your employees.