What is term life insurance?
Term life insurance provides affordable coverage for a specific period to help protect your company from an unexpected death. It can help safeguard your business and ensure you have the money to keep it running smoothly during a difficult transition period.
The cash benefit your beneficiaries receive can be used to pay off debts, keep daily operations going, allow a family member or key employee to take over and reassure creditors and suppliers that your business can continue.
Who is it for?
Term life insurance can be ideal for business owners who require immediate coverage but wish to minimize short-term costs. One example would be a business owner who needs to insure a large financial liability such as a bank loan.
How does it work?
When you buy term life insurance, you choose your beneficiaries, the amount you are covered for, and the length of your coverage – either 10 or 20 years. Your payments will never increase for the entire length of your term. You can renew your coverage when your term finishes, without answering any medical questions, but at a higher cost than what you paid previously.
You can also easily convert to permanent life insurance, which – although more expensive – provides lifelong protection that can accumulate cash value to help you achieve your financial goals.
How does it benefit your business?
Affordable protection to minimize short-term costs
Protecting your business is important – but so is having the money to run it. Term life insurance costs less than other options such as permanent life insurance. This reduces pressure on your capital and can help ensure you have the funds to keep your business going if you, a business partner or a key employee should die unexpectedly.
Ensure a smooth transition
If your business has multiple owners and one of them dies, the insurance proceeds can be used as a cost-effective solution for purchasing the deceased partner’s shares as part of a buy-sell agreement. An effective buy-sell agreement can help avoid conflict between owners and heirs, and help ensure your family receives value for your share in the business.
Easily upgrade to lifelong protection
Permanent life insurance may not be appropriate for your business today. Term insurance can offer an effective short term alternative with the option to transition to lifelong protection when the time is right, without having to answer additional medical questions.