According to the 2018 Small Business Profile conducted by the U.S. Small Business Administration, 30.2 million of the United States’ companies are small businesses with about 58.9 million employees. As a small business owner, group life insurance can be a critical component of the business’ financial portfolio. It can serve a few different needs such as protection, benefits, and prevention.
WHY SMALL BUSINESS OWNERS BUY LIFE INUSRANCE
Group life insurance can be appealing to small business owners for a few reasons. For starters, group coverage can be less expensive than individual policies since most of them are term life policies. Aside from the expenses, there are a few different reasons a small business owner would look into group life insurance.
Small businesses may have to compete with corporations to hire new talent. A competitive edge could be a gracious benefits package. There are a few ways small business owners can offer group life insurance to their employees:
- Pay the full cost so employees can automatically receive the coverage
- Offer employees optional coverage, in which the employee pays all or a portion of the cost
- Pay for a certain amount of coverage and give employees the option to increase coverage at their own expense
In many cases, the employees can take the policy with them should they decide to leave the company. The business owner can set up that option with his or her insurance company.
FUND A BUY-SELL AGREEMENT
If there are two or more owners for a small business, a contingency plan should be in place to determine what happens to an owner’s share of the business should they pass. This refers to a section of a succession plan to ensure the business will live on even after an owner dies. In many cases, owners will cross-purchase life insurance policies, meaning each partner purchases coverage on another. If one owner were to pass, the surviving owners would be able to use the death benefit and buy the deceased owner’s share.
INSURE KEY EMPLOYEES
A large business may lean on a few employees as the heart of their business. However, even if these employees were to leave, the business would most likely still survive. Many small businesses heavily lean on a “key man” or an employee whose contribution to the business is vital. In this case, owners could take out a life insurance policy on that employee to protect their business should something happen to the key employee.
GROUP LIFE INSURANCE CONSIDERATIONS
Like any insurance, purchasing a life insurance policy takes a lot of consideration. Business owners should fully assess the company’s and employees’ needs, then find the right rates and options based on those needs. Every insurance company will have different advantages and features to all policies, so thorough research is critical to get the best coverage at the best price. It’s highly recommended to seek out the help of an insurance professional when trying to navigate the insurance application process.
Group life insurance for a small business owner can be very valuable for the future of any business. The effort put into building businesses and ensuring they can thrive for generations to come should never be put at risk. Purchasing life insurance can help protect businesses and employees from financial adversity during a time of mourning.
Categories: Group Life, Insurance