Downing, Childs & Musser

Life insurance is a key component of sound financial planning, especially for small business owners.  First and foremost, it provides income replacement for loved ones in the event of their death.  Family members often don’t understand many of the aspects of what makes a small business successful, yet an untimely death can throw them right into the shoes of their loved one forcing them to run that business in order to survive financially.

Moreover, many small business owners have loans and/or investors who expect to be paid back.  Family finances can be ruined unless the business can be sold immediately.  This is particularly tragic in partnership situations where a simple buy-sell agreement backed by inexpensive term life insurance could have provided the financial means to keep the business and the family going.  Other uses of life insurance business owners include:  

Key Man Insurance

This type of policy is purchased on the lives of key employees who make a tremendous contribution to the success of a business.  In the event that something happens to the employee, the business owner has the financial means to offset lost business until the employee is more effectively replaced.

 Employee benefit

Group life insurance is a very inexpensive benefit to offer employees, and it can help reduce turnover.  In addition, some types of life insurance that build cash value may be appropriate for a custom benefit intended to put “golden handcuffs” on a valuable employee.

Estate Preservation

Businesses often represent assets that create estate problems for heirs of the business owner.  Taxes can take a tremendous bite out of a small business owner’s estate, often causing family members to take on additional debt, or in some cases sell the business at a bargain price.

Disability Insurance

According to the Health Insurance Industry of America, a 30-year old male has a one in three chance of suffering a disability lasting ninety days or more.  What would happen to your family’s finances if you couldn’t work for six months? 

According to a recent study by Dr. David Hammerstein and colleagues at Harvard Medical School, a whopping 62% of 2007 bankruptcies resulted  from a medical disability.