Why Life Insurance Can Be Essential to Business Planning
Last week I spoke to a group of benefit brokers who seemed surprised when I told them how life insurance can not only be a great employee benefit, but also a useful asset for businesses. Some thought life insurance was no more than group term life insurance, useful for income replacement in case of an employee’s premature death. And, this week I’ll be addressing a group of business owners. I’m confident that when I bring up the idea of life insurance as a corporate finance tool, they’ll be surprised — even suspicious. For some reason, life insurance is sometimes forgotten as a financial tool useful to businesses.
Simply stated, there’s more to business life insurance than the claims it pays. Modern day life insurance policies cover a myriad of risks and offer financial advantages that no other contract can duplicate. Businesses own life insurance to cover obligations such as deferred compensation, to pay off debt and to indemnify the loss of key employees. Many businesses know of the tax, accounting and cash flow advantages of the product, and own multiple policies on multiple executives.
Just in case, however, the insurance industry has a month each year to remind people of the uses of life insurance. September is Life Insurance Awareness Month, and it’s only appropriate to remind businesses and business owners that they, too, can benefit from this financial contract.
Have you discussed with your business advisors recently about whether life insurance can be used to help your company? My recent Forbes column may give you some ideas for how this product can benefit both you and your business.
Steve Parrish is a regular contributor on Forbes.com, discussing issues and trends that impact business owners.
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