How Life Insurance Can Benefit Your Business

The term life insurance often encompasses a whole range of other more specific insurances, many of which can benefit the business in some way or other. In general terms life insurance pays a lump sum when a certain event occurs and this money can then be used to pay for costs incurred due to such an event.

A business can take out a specific life insurance that will allow the remaining partner or partners to buy out the shares of the one who has passed away. Such term life insurance is ideal for a family business or partnership because you don’t have to pay tax on the benefit so long as it is in your own or your spouse or partner’s name. Such life insurance is often called business succession insurance.

For insurance to actually protect the business you could choose business expense insurance. This is rather like income protection, but it is for the business rather than for a person. It will cover those business expenses that will still occur even though the business owner is unable to work due to disability.

The expenses that can be insured are those that are classed as being used to obtain gross income for the business. They include accounting and auditing fees, advertising costs, insurance, depreciation, utilities, lease or rent costs, mortgage interest, rates and taxes and professional association subscriptions.

Having the insurance to pay such necessary components of your business expenses will certainly help you keep the business up and running during that time when disaster strikes. Not having such insurance could well see a good business go to the wall.

Another kind of insurance to protect your business is loan protection insurance. If your business has a loan to cover recent expansion, start-up costs or even capital equipment it is very likely you would have had to provide some kind of director’s personal guarantee. This could be over a personal asset such as your home. If you were permanently disabled and this loan could not be paid then the business would certainly be lost and maybe your home as well. But you would be protected from this situation with the right kind of insurance.

About the author

Patrick White is an Insurance Advisor with an experience of more than 15 years.

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