Life insurance is not always just a policy to ensure that their family has the proper finances after they pass. There are many different uses and benefits associated with life insurance that make them a great business commodity.

Whether you are a small business or a large corporation, life insurance policies can greatly benefit your business. Today, we are going to look at 7 great business uses for life insurance.

Avoiding Liquidation Of Your Business

Liquidation of businesses usually comes when a family member or friend passes, causing a business to sell their assets to come up with the funds needed to stay in business or recuperate losses. Since most cases call for an urgency of funds, many assets may be sold for less than market value, killing any equity you may have in your business.

Life insurance can help prevent liquidation by providing the funds needed to keep the business moving forward or to pay for the proper logistics if you are needing to move business items to a new location. When getting your life insurance paperwork filled out, ensure that the right beneficiaries are getting the finances in order to take proper care of any business or businesses you may have.

Get Financing

Most businesses are going to need to borrow money throughout the life of the business. This may be to buy assets, pay employees, or any other situations where you may not have immediate funds. If you do not have the proper credit the bank is looking for, they may allow you to use a life insurance policy to get financing.

The bank will ask the business owner to take a life insurance policy out on themselves and name the bank as a beneficiary. This guarantees that the bank will have their loan paid out in the event of the death of the business owner. This is a common practice in business and is an easy way for businesses to get financing.

This becomes especially true for things like SBA loans and collateral assignment.

Accumulate Cash

If your business is wanting to expand or is wanting additional money to get through the slow season, a cash accumulation policy can be helpful. Cash accumulation policies allow business owners to borrow the cash value of their policy to help with business needs when needed. They may also allow the cash to accrue to be able to use it as a retirement fund later down the road.

The cash contributions put into this fund will earn tax-deferred interest and will allow you to withdraw at any time for just about any reason. You will have to have a life insurance policy to receive a cash accumulation fund.

Recruitment Tool For New Employees

When recruiting new employees to your business, you will want to have great benefits to compete with other employers. This can include sick days, holiday pay, health insurance, and life insurance policies. These are key items that potential employees will look for when choosing an employer, so having these benefits can help guarantee a better chance at hiring great employees.

Life insurance policies, more specifically group life insurance, are one of the most sought after benefit packages that people look for when applying to jobs. While uses for life insurance are great, if you are able to pay a portion of the employee’s premium will make your business even more attractive.

Provide Bonuses For Executive Employees

If you have a larger business that has executive employees, you can get additional benefits for them through executive bonus plans. These plans require the executive to own the life policy and pay the premium, but you get bonuses that pay the amount of the premium and tax liabilities associated with the life insurance policy.

As an executive with this type of plan, you can supplement your retirement or other items with the cash value of the plan. If the executive were to die while employed with the company, the family would get the death benefit of the plan. This is going to be best for larger companies, not so much smaller businesses.

Use As Buy-Sell Agreements

If your business has multiple owners, you will need to have a conversation about each other’s portion of ownership when you pass. Buy-sell agreements are a great way to ensure that the deceased owner’s portion is properly transferred after their death.

A buy-sell agreement can be funded through a life insurance policy. For this to work, each owner will need to take out a life insurance policy on the other owner. If one of the owners were to die, the life insurance benefits will be used to purchase the share of the deceased owner. This is one of the best ways to handle the death of a business owner in a multi-owner business.

Provide Additional Protection For Key Executives

As a key executive, the pay that comes with it usually is not reflected in standard group plan life insurance policies. By purchasing specific life insurance policies that have higher death benefit protection can ensure that your highest-paid executives are covered in the event of death while employed.

This is also a great way to ensure that you are getting the best recruits when looking to hire an executive employee from outside of your business. Those applying for an executive position are most likely going to require these types of benefits from a company, so having this option can make your business stand out from other employers.

Conclusion

With all things considered, you can easily see that uses for life insurance policy can make your business better not only financially, but attractive to current and potential employees. Uses for Life insurance policies are one of the most sought-after benefits next to health insurance, so having this will keep your business competitive with other employers. A life insurance policy is also a great way to ensure you have an emergency fund to pull cash from in the event your business suffers a financial crisis. Many businesses cannot fund a crisis outright, so having a plan that you can pull cash from can keep you financially safe.