Last editedJun 20212 min read
If you own a small company then you’re probably used to putting safety nets in place for if the worst were to occur, but have you considered life insurance? Here are some of the life insurance policy types you should think about signing up for.
Types of life insurance policies for small businesses
There are plenty of types of life insurance policies a business owner can consider. Think about your company as a whole, and your own position in it, as you form an action plan for staff insurance. You may want to consider:
Key person life insurance policy
If there is someone in your business whose untimely death would be catastrophic to the future of the company, consider key person insurance. This insurance will pay out directly to the company, and creates a financial cushion that you can use to find a replacement, protect profit, or pay off debts and close the business. This can be a whole life insurance policy that covers the person forever or a term life insurance policy that only covers them for a set period.
Individual life insurance policy
Individual life insurance covers one person, and pays out to their chosen beneficiaries, usually friends or family. This insurance is also available as permanent insurance or as a term life insurance policy model.
A buy-sell agreement is formed when there is more than one owner of a business, such as a business partnership. In the event of one owner’s death, a buy-sell agreement facilitates the sale of their business share to the remaining owner or owners. This agreement stops the share of the company owned by the deceased from passing to families who either don’t want it or aren’t well versed enough in business to take it over. The deceased family receives cash to make up for the loss of this business share.
Group life insurance policy
Group life insurance is the same as individual life insurance, but is offered to a group, i.e., all your staff. For businesses, this is usually the most competitively priced option compared to covering everyone individually. Group coverage is usually offered as a term insurance policy. There may be a legal requirement for group coverage, i.e., in some cases, at least three quarters of your work force may need to be covered.
What is the best life insurance policy for my business?
At the very least, you should have life insurance in place for yourself, with key person insurance being a very good idea if you know you are crucial to the future of the business. In terms of creating a work culture that is fair and does the best for your employees, you may also want to offer life insurance. This isn’t required, but it can be key to attracting the best talent and maintaining employee satisfaction. It’s also worth noting that life insurance premiums, unlike health insurance, are not considered a business expense and are not tax-deductible.
Group insurance can be paid entirely by the company, or you can split the cost with each employee. Some employers also allow employers to keep their life insurance policy when they leave, which may be something to keep in mind if you offer a whole life insurance policy, as these grow in cash value over time.
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