Why Small Business Owners Need Life and Disability Insurance

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When you decided to go into business for yourself, your first thoughts most exuberant were thoughts of what could go right: more freedom, happier customers, increased earning potential. However, your later thoughts may have turned to what could be wrong. That's where insurance steps in to help.

Small Business Owners Need Life and Disability Insurance
Small Business Owners Need Life and Disability Insurance

As a small business owner, entrepreneur, influencer or freelancer, you are your business, and your business depends entirely on you. Luckily, insurance is there for you when things take an unexpected turn. You've probably thought about general liability insurance or other business insurance, but what about life and disability insurance?

Specifically, life insurance provides peace of mind for your business and in the event of your death for all those who depend on you – family, employees and customers.

Similarly, disability insurance provides you with income in case you are unable to work due to illness or injury.

Why entrepreneurs need life insurance

Small business owners are accustomed to doing it all and managing very busy schedules. However, every once in a while, it is necessary to step out of your "doing" role and step into your strategic planning role. While it's never at the top of anyone's to-do list, strategic thinking should include preparing for the worst.

Entrepreneurs and freelancers are the driving force behind their companies. They drive growth, care for customers and motivate employees or partners. So, what happens to their companies and everyone they support, if one (or only) person in the key dies?

A good investment that can help address the death of a key person is life insurance. Life insurance can ensure that the company has the resources to continue taking care of the business, even if you are gone.

In this case, there are a few ways you can use life insurance to support your small business. Here are some key policies to consider.

key person insurance

Key person insurance is a life insurance policy that pays out on the death of a key owner/employee. The business itself buys the policy and all proceeds from the death benefit are also paid directly to the business.

The main advantage of key person insurance is that the cash provided by a policy can be a bridge to the next essential step in the life of the business—whether a key person is finding a replacement, selling the business, or moving on to other projects. Are you growing?

buy/sell agreement

If you have more than one business owner, a buy/sell agreement is another option to reduce the risk of death of a major partner. Entrepreneurs can use life insurance to fund a buy/sell agreement. The cash benefit then allows the other owners to purchase the deceased partner's interest from their remaining family members. If you are a business partner with a family that cannot or does not want to run its share of the business in the event of your death, buy/sell funding is a good option.

personal life insurance

Additionally, even if you do not have partners, you should consider a basic life insurance policy to cover your debts and responsibilities. If you die, your family will receive financial relief from cash benefits that can help you close or sell your business if they no longer want to continue working for you.

Disability Insurance Ideas for Entrepreneurs

Another frightening thought for entrepreneurs is what if you don't die, but are disabled instead? You rely on your own hard work inside your business to pay your bills. Accordingly, a small business owner like you is eligible for disability insurance coverage. In the event of injury or illness, it can provide at least a portion of your expected income, assuming you can no longer work.

Disability Insurance for Employees vs. Entrepreneurs

According to the Social Security Administration, one in four people will become disabled in their working life. With these constraints, disability insurance becomes an essential protection for all workers – whether you are an employee or an entrepreneur.

disability for employees

Often, corporations provide long-term disability insurance to their employees up to a certain percentage (usually about 66% of your typical paycheck). Then, their employees can buy more disability insurance to cover even more. In addition, corporations may also provide or subsidize short-term disability policies (which cover approximately three months) for their employees.

Disability for Entrepreneurs

On the other hand, small business owners, especially solo entrepreneurs, artisans and freelancers, have to purchase and pay for all of their disability insurance. With no corporate subsidies, many of these entrepreneurs think disability insurance will be too expensive. However, there are different price points available for different disability policies, and a good insurance agent can help you find one that best suits your needs and price considerations.

If you are a small business owner that does not have disability insurance, or yourIf you think you may not have enough disability insurance, your first step is to find out how much (or how much) you need. You can start with this disability insurance requirement calculator to get an estimate. Then, your next step is to speak to a licensed insurance agent to help you understand the policies available to you.

Conclusion and action steps

According to the Small Business Administration (SBA), more than 99% of US firms are small businesses. Clearly, our nation's entrepreneurs and small business owners are vital to our economy. That's why we need to do everything we can to protect and support them, and life and disability insurance helps us do that.

If you're a freelancer, influencer, or business owner, it's up to yourself to protect everything you've been working so hard to build. A good first step is to speak with a licensed insurance agent to calculate your coverage needs, and then see which policies are appropriate for your unique situation.

source by: lifehappens.org/ only information purpos.

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