Life Insurance for Small Business Owners

Tips to protect your small business and finances if you die or become disabled
By K. Ring, Freelance Writer Small business owners need to protect their businesses and assets in the event of death or disability with business life insurance. Many small business owners are sole proprietors, which leaves their families vulnerable to business debts.
 

Be realistic when choosing life insurance companies and benefit amounts; make sure the debt for your business is covered with business life insurance. Many small business owners also include adequate life insurance benefits to allow their small businesses to operate for at least a year after their death.

Disability insurance can be included in life insurance policies, especially for the business owner. Disability insurance will cover either a permanent or temporary disability and will supplement income lost due to the disability.

Life insurance policies vary by the life insurance company and the amount of monetary benefit you choose. Life insurance rates and quotes are based on:

1. Your age and overall physical condition at the time you apply for the life insurance;
2. The occupation that’s considered the main function of your business, and the danger rating of the occupation; and
3. The benefit amount and type of insurance you choose, the payment selected and the base rate of the insurance company.

Determine how much life insurance you need

Make a list of your business expenses that must be paid off in the event of your death. Include mortgages, property taxes, liens, business loans and vendors owed. Make a list of the minimum amount of money needed, then include your annual salary from the business. Calculating this life insurance information helps you determine the amount you need.
Try: Use the Metlife human value calculator, which helps determine how much life insurance you need. SmartMoney also offers an interactive survey for your life insurance needs.

Choose the type of life insurance you need

Term life insurance is the type of life insurance most small business owners buy. Term life insurance offers good value for the money but doesn't have any cash value other than the death benefit. Key Man insurance is used to insure the life of a key employee whose death would cause financial hardship to the small business. Whole life insurance is more costly but it does have cash value that you can use while you own the policy. Universal and variable life insurance policies are investment driven. Premium payments can be made from interest earned on the investments, but remember these types of life insurance policies can also lose investment money. If you are considering this type of life insurance, make sure the actual face value of the policy isn't affected by investments.
Try: The Insurance Information Institute provides in-depth life insurance information and a of the different types of life insurance policies available for small business owners.

Compare prices and get life insurance quotes online to save time

Check the rating of the insurance company you are considering. Life insurance companies are rated by their financial stability, as well as their credit and debt rating. A sound insurance company is a sound investment for your life insurance premiums. Compare apples to apples. If you are considering straight term life insurance, make sure the insurance company comparisons also compare straight term life insurance, while others provide you with life insurance rates and quotes for whole life insurance. Get online life insurance quotes from several companies at once. There are several insurance companies that offer a multiple quote service. You save time by using a multiple quote service because all your information is only entered once.
Try: Use Accuquote, IntelliQuote or Insure.com to receive life insurance quotes online from several companies at the same time.

• Check with the Insurance Commissioner of your state to verify the company is licensed to sell insurance in your state.