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.