Why Start up Companies Need Life Insurance

By Bret Harding

Often times when starting a new venture life insurance is overlooked, this is because in most cases the individual had life insurance coverage through their previous employer.  It’s critical to not overlook the important role life insurance plays in starting a new business venture.  After all your family, your customers, and your business partners will be depending on you more than ever.  And often time’s banks require a life insurance policy on the business owner before lending any money.

Life insurance is especially important to start up companies, because often times there are only a few key members of the business that perform all the vital functions.  In these situations, life insurance can help the surviving partner or the family members of the deceased proprietor have resources to keep moving forward.  Life insurance provides coverage that can help make a difficult situation easier to manage. Effectively utilizing life insurance in a business start up will assist the company with the wide range of factors that arise when an owner or a key executive or family member is no longer around to handle his or her usual responsibilities.

Essentially, the life insurance that every start up needs can be broken-down into three types or categories: 

I. Individual Life Insurance:  An individual life insurance policy will ensure the family members of a deceased business owner will have the necessary financial resources to move forward during a difficult time.

II. Key Man Life Insurance: Essentially key man life insurance protects the business should anything happen to a key individual (i.e. sales executive, computer programmer, key partner, etc).

III. Buy-Sell Agreement:  A buy-sell agreement is critical business document that addresses important business concerns like “what would happen to the business if one of the owners passed away, left the company, suffered a divorce, or became disabled?”  

 By insuring the life of persons who are critical to the life of the company, it is possible to safeguard against the unexpected demise of an individual who possesses a skill set that is foundational to the success and ongoing life of the company. While life insurance cannot completely fill the gap left by the death of a valued member of the organization, life insurance coverage will provide the corporation with financial resources that can be applied to the expanses associated with finding and training a new employee. Business life insurance proceeds can also be used to cover the expenses of obtaining consultants and other temporary services that will assist the company in continuing to operate in the short term.

For additional help with your business life insurance needs call Bret Harding: 801-372-2647. Bret specializes in helping start-up companies navigate their life insurance needs. Visit: www.UtahInsuranceSolutions.com.