by Suzanne Lundeen Abrams | Featured Contributor
“The best-laid plans of mice and men often go awry.” -Robert Burns
I often feel running a business is like riding a roller coaster. Ups. Downs. Exhilaration. Fear. Doom. Elation. Can you relate to this at all?
I find this chart hilarious and oh so true for my personal business trajectory. Some days things just don’t go the way you hoped they would and you just have to keep your head up and push through knowing it will get better.
As a financial planner and insurance expert, I have special knowledge in preparing for the unexpected and it’s given me a leg up as I’ve set up safety nets for myself, my family, and my clients. Therefore, I have confidence that no matter what happens, my business, my clients and my family are protected in times of crisis. Do you want to have this type of confidence too? Let me share some ways you can prepare your business for the unexpected by using insurance.
How Insurance Can Calm the Entrepreneur
Simply put, insurance is a way to hedge risk by using leverage. One of the biggest risks business owners face is the loss of their own ability to work. If you or other key people in the business can’t show up due to death or disability, for example, does the ship go down? How do you calculate your own personal value? You are priceless and irreplaceable and no amount of cold hard cash can remove the emotional tragedy of losing you. Your family, clients, and employees count on you. You can’t guarantee you’ll always be there but you can plan ahead and set up a financial safety net and a succession plan to make things go as smooth as possible, with or without you.
There are various ways to use life insurance in your business to help you protect and prepare for unexpected circumstances. The plan you put in place will be unique to your own business.
3 Common Uses for Life Insurance in Business:
- A Personal Life Insurance Policy helps your family pay off any business debt and get the cash they need to replace your income. It buys them time to handle decisions about the business succession. If you pass away, who’s going to run the business? Who’s going to take over all the responsibilities?
- A Buy-Sell Agreement (also called a buyout) is a contract that business owners use to protect or continue the business in case of unforeseen circumstances such as death, divorce or if a partner wants to exit the business. It’s like a pre-nuptial for your business. The terms are agreed upon in advance so it’s a fair deal for all parties. Emotions in the heat of the moment can make the deal seem unfair so it’s best to have terms decided in advance when heads are cool and calm. Life insurance provides the cash needed to buy out the partner(s) at the agreed-upon price.
- Key-Person Insurance pays the owner or owners of the business a specific amount if a key employee were to suddenly die. Replacing a key employee takes time and can cost a business valuable clients during the transition. The death benefit paid to the business-owner at the time of a key person’s death helps to cover financial losses incurred in the business. The policy’s cash value may also be available as a loan or withdrawal during the life of the policy.
Buying life insurance policies for yourself, key employees and business partners is an important component of succession planning. Proper planning assures continuity for customers, creditors and employees. Make it a priority to review your business succession plan with a trusted advisor so you have total confidence that even if things don’t go as planned, everyone who counts on you and your business will thrive despite grieving what is absolutely priceless and irreplaceable: YOU.
The highs and lows of running a business can test the strength of even the most seasoned entrepreneur. It’s important to solidify your business succession plan and fund it with insurance so all your sweat equity doesn’t go to waste if you’re no longer there to steer the ship.
Securities offered through Securities America, Inc., a Registered Broker/Dealer, Member FINRA/SIPC,
Suzanne Abrams, Registered Representative. Advisory services offered through United Advisors, LLC,
a SEC Registered Investment Advisory Firm, Suzanne Abrams, Investment Advisor Representative.
United Advisors, LLC, Lundeen Abrams Advisors and Securities America are unaffiliated.
*The opinions and forecasts expressed in this piece are those of the author and may not actually come to pass. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Past performance does not guarantee future results.
All material contained herein is for informational purposes only. This is not a solicitation to offer investment advice or services in any state where to do so would be unlawful. Past results are no guarantee of future results and no representation is made that a client will or is likely to achieve results that are similar to those shown. Please refer to disclosure document for additional information and risks.
Suzanne Lundeen Abrams is passionate about empowering women to take the reins of their financial lives. She runs a boutique asset management firm halfway between Minneapolis and Lake Minnetonka.
Suzanne loves to help clients create intentional legacies. She helps her clients dream it and then do it.