5 reasons why business owners should consider whole life insurance

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Published on 15/09/2020

Most small businesses think that going for a whole life insurance option is a luxury. However, the benefits of whole life insurances can clearly make or break a business during any emergency. 

Whole life insurance is a fool-proof plan that every business should opt for. Big business houses and conglomerates realize the importance of having such an insurance policy and does not consider it as a luxury. Whole life insurance guarantees unmatched services to both the employee and the business owner of a company. 

Here are five reasons for business owners to get whole life insurance:

1. Protect your intellectual property and employees

Employees are important for the company. Without skilled employees who know their job, a company cannot function effectively. Whole life insurance for a business can insure this intellectual property of an employee. Due to the sudden demise of an employee, the company can get financially compensated to offset any loss due to this demise. It would also give the company time to fill up the gap created due to the death of the employee. 

2. Protection for business capital

You can raise a handsome amount of business capital via whole life insurances, which guarantees a cash value to the business owner. Whole life insurance’s cash value is a sum that grows over time to become a massive corpus of money, thanks to all the dividends and interests.

As a business owner, you can use this amount upon maturity to meet rising business costs and protect your immediate business if it goes to successive losses. The cash value accumulated over time also ensures that any untimely expenses that may suddenly arise be met with ease without you having to dig into your core capital. Rather, by accessing the cash value, you can bring in more cash into your capital. You can also take out policy loans multiple times. The interest rates on policy loans are generally lower than normal bank loans.

3. Device an easy secession plan for business

In case your business partner chooses to part ways, dies an untimely death, or just breaks away due to a sickness; the last thing that you want to see is your business failing. It can become challenging to sustain the business individually with half the funds, not to mention; half the company’s brains.

Whole life insurance can be beneficial in this case with its buy-sell agreement feature. This feature ensures that there is a smooth exit strategy in case of secession. In such a policy, each business owner will have a whole life policy purchased against them. In case of an untimely death, the surviving owner can use the death benefit proceeds to absorb the remaining portion of the business. Plus, since they can access the  cash value of the insurance, there is no problem with the cash flow either. 

4. Avail tax benefits

Whole life insurance promises exciting tax benefits to the policyholder. The tax benefits are also applicable to the cash value and the death benefit. Proper planning can make the distribution free of tax as well. For contractors or self-employed workers, who are not covered by their employer regarding Medicare tax or Social Security tax, whole life insurance can help in growing their wealth tax-free too. Benefits of whole life insurance for a business owner are retirement income (free of tax), policy loans (free of tax) and growth of cash value (free of tax). When it comes to the death benefit, the IRS considers it as inheritance, so it is free of income tax as well.

5. Attractive employee benefit

Whole life insurance makes sure that the company employees are given a benefit. This helps the company retain them for the future. The business owner can offer them an open life insurance policy and pay the premium on it, thereby availing the tax benefit. Additionally, business owners can use the cash value of this policy for their business, boosting their cash flow. When the said employee leaves, the business owner can transfer the said policy to the employee. The further premiums will be paid by the employee. Thus, this acts as a way to keep a gifted employee in the company.

For a business owner, whole life insurance is extremely important. The benefits of whole life insurance policies seem mutual for both the business owner and the employees. The policy can act both as an investment opportunity and protection against a host of uncertainties. Plus, it comes with the rewards of tax benefits. You can get in touch with MyTaxFiler for more information on how to go about getting a whole life insurance policy.

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