How Whole Life Insurance Provides Business Owners with Unique Tax Benefits
As a business owner, you have a lot on your plate. You have
all of the responsibilities associated with owning and
managing your business, but you also have the pressure of business growth, keeping it thriving in a competitive, and challenging market.
Also, you have a personal life outside of your business. Perhaps with a family or individuals that rely on you emotionally as well as financially.
If something were to happen to you, would all of your interests be covered? What would happen to your business if you were to die prematurely? Would your family have the money to cover all of their daily and long-term needs?
While these questions are never pleasant to consider, they are essential to ask yourself. Luckily, there are actions you can take that can help to relieve the pressure these questions bring up. One of the most effective and all-encompassing steps you can take to provide for your family and business is to purchase a life insurance policy.
Several types of life insurance are available to you as an individual and a business owner. And purchasing a policy as a business owner may even be more important than you might think, as you may not be privy to the same benefits that you would be if you were an employee of a company, such as a group life insurance (provided by your employer), disability insurance, or retirement plans.
Types of Life Insurance
Life insurance falls under two main categories: term life insurance and permanent life insurance. Both are aptly named, with term life insurance covering a portion of your life or predefined period. Permanent life insurance will remain in place until you pass. In either case, premiums must be paid when due.
With term life insurance, you determine the amount of your death benefit (or the money that would go to policy benefactors on your passing) and the term length for coverage. For example, you may choose a $100,000 policy for ten years.
While term life insurance is an economical option, it does not offer the extensive benefits that permanent life insurance provides. Also, if you decide you still need coverage after a term policy runs out, a newer term policy could cost more, as they tend to become more expensive the older you get.
Permanent life insurance offers the added benefit of cash value, which is essentially an additional investment element. The premiums you pay on your policy go partially towards the life coverage, and partly towards an investment–either a savings or a stock type account.
With term life insurance, if your policy term ends before death, you get nothing at the end. With permanent life insurance, you always have the investment portion, even if you choose to allow the policy to lapse. And if you continue to pay your premiums, the policy lasts for the length of your life. Upon your death, your beneficiaries receive both the insurance as well as the investment portion.
There are two main types of permanent life insurance: whole life insurance and universal life insurance. With whole life insurance, you pay the same steady premium, and the policy remains intact for as long as you do.
Upon the policyholder’s death, the beneficiaries receive the death benefits, as well as the investment portion of the policy. Universal life insurance offers more flexibility in terms of benefits and premiums but usually requires a medical examination to have access to all of its options.
Determining Your Best Policy
When it comes to choosing the ideal life insurance policy for you, it is essential to consider both your personal life, such as your family and dependents, as well as your business interests.
Business owners require insurance for similar reasons that family providers do–to replace income, to cover the costs of the loss, replace collateral, and to protect the future of the business.
Your employees depend on you to provide their salaries, and for their livelihoods, so you want to be sure that in the event of your untimely passing that your business and their careers don’t fail as a result. That’s why many business owners choose whole life insurance for the many benefits it provides them in both a professional and personal capacity.
Benefits of Whole Life Insurance
The purpose of whole life insurance is to help you fulfill your long-term goals while also protecting your interests for your entire life. While this type of insurance may be more expensive upfront, in the long run, it can more than pay for itself. Whole life insurance offers
- Consistent premiums.
- Guaranteed, increasing cash value.
- Unique tax benefits, loans.
In particular, the tax advantages of whole life insurance can be appealing to business owners. While the person is living, these advantages extend to the cash value, and they apply to the death benefit once the insured has passed.
Because of this, whole life insurance supplies individuals and business owners with a built-in way to grow their wealth tax-free. Additionally, when appropriately managed, whole life policies can offer the policyholder tax-free loans.
Loans can be taken out from the death benefit and do not need to be paid back, providing the policyholder with yet another advantage that other types of policies do not.
Looking to the Future
The SBA Office of Advocacy defines a small business as one that employs at least one but no more than 500 individuals. Typically While your small business may employ significantly fewer people, this means that according to their data, in the United States alone there are over 30 million small businesses, providing up to 47.5% of the country’s workforce.
Small business owners are responsible for almost half of the jobs in the United States. One way business is able to protect itself and consequently those jobs, they turn to life insurance. According to these same statistics, “in the third quarter of 2016, 749,000 jobs were lost due to small business closings,” or businesses failing.
Don’t let your loyal employees, or your hard-earned company, fail due to untimely death. Explore purchasing a whole life insurance policy. Grow your wealth, as well as, guarantee the future of your business, the livelihood of your employees, and the financial security of those who depend on you.
Speaking with an experienced insurance agent is the best method to learn about your options. A knowledgeable, trusted agent will know of reliable carriers who will prepare proposals without cost yo you.
Since 2010, Peter Green Insurance Agency LLC (PGIA) has provided businesses and individuals with “Asset Protection and Financial Security”™ by selectively using insurance coverages as a hedge against inherent financial risks.
Peter W. Green is the managing member of PGIA and a Certified Insurance Counselor (CIC). CIC is an internationally recognized designation awarded by The National Alliance for Insurance Education and Research to those who make the investment in dollars, time and study to gain a unique level of expertise.
Need answers to an insurance question? Have a specific insurance concern? Would you like a review of your policies before renewal? Call our office, 714-258-2800. Would you like to understand life insurance policy specifics better? Call and ask for Peter. If you instead, contact Peter by email. Our agency offers a unique level of customer service rarely found today. Let’s talk.