Don’t Let Your Business Die

Let’s talk about a topic that is not necessarily fun to talk about, but it is important to talk about. If you’re owning a business, what happens if you die? And the reason we’re discussing this is because most people are familiar with life insurance. If you’re collecting a paycheck, you want life insurance for your family to replace the income that you would’ve made for the rest of your life. You essentially want enough money to cover the family so that way they’ve lost you, but they haven’t lost the income and they can still support the family.

If you’re owning a business, let’s take this a step further. Obviously, if you were to die, you wouldn’t likely want the business just to go poof and die and all of a sudden, your family has nothing. So you get life insurance and it’s there to protect your income for your family after you’ve passed, but it can also be used to keep the business running. You might have employees. You don’t just want them to all suddenly become unemployed. You can use life insurance to help fund your replacement, and that’s really the extra step is not only if you die.

But let’s say that there’s a key employee that dies, because it’s really the same concept. If there’s a major death in the business as far as the importance of either bringing in money to the business or keeping the business running, we want to make sure to use life insurance to cover for that. So let’s use an example. Let’s say your company has sales of $10,000,000 a year, but there’s one person, there’s one employee. That could be you, that could be somebody else, but let’s say there’s one employee that is responsible for bringing in or being heavily involved in managing $5,000,000 of that. So half your business is tied really heavily to this one person. If that person were to die, what would happen to that business? Maybe some would stay, maybe some would go, but let’s say hypothetically that half the business would leave. So this person, out of a $10,000,000 business, this person is managing $5,000,000 of it, but if he or she dies, half of it might go to a competitor. How do you cover for that? I mean, we’re talking about $2,500,000 just walking out the door when somebody dies.

That is where life insurance can help and it’s really cheap. It’s not expensive. There’s tons of different insurance companies that you can use for this. It doesn’t have to be that hard, really, it’s just a matter of identifying who that important person is in the business, and it could be multiple people, but who is that important person and what would the financial impact be if that person were to die? And then simply using life insurance as a way to cover that in case that person does die, and it’s called key person life insurance. It’s not much more complicated than that, but unfortunately we don’t see a lot of businesses actually put this in practice as they should.

It can be devastating if something happens. Obviously, it’s already devastating if somebody dies. That’s hard enough, and like I said, most people are familiar with getting life insurance for them personally for their family to make sure that the family has income if something happens to them, but the extra step in the business is if it’s you or if it’s somebody else or if it’s multiple people that have a huge financial impact on the business, well go get life insurance on them so that way if something does happen, at least the business still has money. Don’t let the business die with somebody else dying. There may be a lot of people that would be out of a job or maybe a lot of clients that would be negatively impacted by the business closing. Let’s shore all that up. Just go get some pretty cheap life insurance coverage and make sure that your business does not die when a key person dies. If you need any help with this or have questions, please reach out to me, I’m happy to help.

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