Why life insurance is vital if you have a small business

It’s rare that you meet a small business owner who buys life insurance to protect all their debt. If you own a small business, it’s possible that you have never even considered the need for life cover.

However, there are many compelling reasons why you should consider taking out life insurance. Here we explain why many business owners are underinsuring themselves.

Many people have sophisticated life and income protection arrangements in place to provide for their family and dependents, few take the same care when considering their business, even if they have a large debt.

However, it’s vitally important for you to consider the effect that your death would have on your business.

The key question to ask yourself is ‘why am I running my own business?’ Many people tell us that they are building up a nest egg for their retirement or to provide a financial legacy for their children. So, what would happen if you were to die? The business would probably pass to the surviving spouse or it would be sold. Does this not defeat the original intention of growing the business?

Protecting your business debt through life insurance means that your beneficiaries could inherit an unencumbered asset.

Just 37 per cent of married couples with children have life cover

Research has found that in the UK just 37 per cent of married couples with children have life insurance. This figure is even lower for single parent families and just 31 per cent of unmarried parents living with children have life cover.

If you’re a business owner then we would certainly urge you to speak to a professional finance advisor. Consider what your business is intended to achieve and think about the impact of a range of scenarios. While it may not be necessary to insure the whole business and its associated debt, taking out some life insurance to help dependents in the event of death is likely to be invaluable.

And, with a growing business, there is certainly some spare income available to invest in life insurance. So, if you’ve never thought about protecting your business debt before, now is the perfect time to do so.

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One of the main issues holding back small business growth is obtaining the funding they need to develop. Although some businesses fail from cashflow problems, more often they simply stagnate because of a lack of funds to grow.

We provide advice for small businesses based on our own experiences (and mistakes!) and sometimes it's good just to chat – a problem shared and all that.

We cover topics such as how to raise funding to grow your business and how to run your business more efficiently to make the most of the cash you have. We cover issues that can give you a better chance of succeeding first time round such as where and how to benefit from government grants and how to attract alternative funding such as crowd-funding and angel investors for direct investment.

But success is not all about the financial side: such as handling cashflow effectively, dealing with debt or where to get loans - so we also discuss cost-saving efficiencies particularly when it comes to staff and premises. Too many small businesses take on the big financial commitment of a swish new office and expensive warehousing facilities too soon. Equally it is no longer necessary to take on all staff as permanent employees as many people prefer the flexibility of freelance work and remote working.

So join us by commenting on anything that strikes a chord with you – we love to hear other people's opinions and if you have a small business success story to share we would be particularly interested to hear about it.