Many people prefer to be self-employed because of the level of flexibility and freedom that comes with being your own boss. But building your own business isn’t easy, which leaves many to overlook certain necessities in order to save on costs. Unfortunately, life insurance is often one important factor that is often cut off.
Everyone needs to be insured, especially if you’re self-employed. For those who have a salaried position at an established business, getting insured is generally easier as employers tend to have company-wide plans for their workers. But that luxury is not guaranteed for those who run their own business.
If you have your own start-up and are self-employed, here are a few reasons to not skip out on getting the proper coverage you truly need.
No Companies are Behind You
This is the most obvious factor of being self-employed, you have no organization to support you and provide you and your family with benefits. As a salaried employee, your employer typically handles the benefits that come with your work insurance plan when you pass away. If you are self-employed and don’t have coverage, your family will be left to organize and cover all the costs during an already painful time.
As a business owner and your own boss, you’ll have to be able to support yourself with the right life insurance plans. Passing away as a self-employed business owner leaves your family to worry about the business and its stability. As an employee, your family won’t have to worry about the company’s state because the owners and management will carry on.
Ensuring you are properly insured should be one of your first financial acts as a self-employed person. Without the support of a large company, your family can be left with more to handle without any monetary assistance.
Becoming self-employed often means that you will be acquiring and maintaining debt. This debt can come from a variety of business decisions, equipment purchases, and other loans to help build and secure your new business venture. But what happens to your company’s loans if you pass away uninsured?
The worst-case scenario is that your family will be left to cover any remaining debts after your passing. This can be incredibly difficult as business loans are typically very large because of start-up costs. Your surviving family will face legal issues if these debts are left unpaid, which in turn can force your family to do something they may not feel comfortable with like selling the business.
Keeping the Business Around
Many people who start a business generally want their families to keep it up and running after they pass away. In this case, a life insurance plan can be extremely useful for your loved ones who will be taking over. After you die, your family will be in a large transition period as they prepare to take over your business. A life insurance policy can help provide them with the necessary income for the transition of ownership.
The capital from a life insurance policy can support your family members as they learn to take up and fulfill the roles you once did, or it can help them hire the necessary staff they may require. If your business was the primary or only income generator, your family can also use the policy’s benefit to help cover bills and other expenses until the business is back to its normal functions.
Key Person Insurance
For those with business partners who handle a certain vital aspect of the business, there is a specialized life insurance policy called “Key Person Insurance”. This plan is purchased on a key executive’s life and sets the business as the policy’s beneficiary. Key person life insurance will cover you and your business should an important executive suddenly pass away and leave your company without an essential member.
For example, if you run a design firm that specializes in both print and web design and your head graphic designer passes away, your business could grind to a halt without the talent of your leading designer. With key person life insurance, your company will receive a cash payout that will help give your business time to either replace your executive or develop another strategy to protect the day-to-today operations.