People behind startups tend to be driven, passionate, and hard-working. There are so many aspects that go into getting a business off the ground, and they’ve got to be on top of every last detail. One of those details is life insurance.
While it may seem on the surface that there is no connection between life insurance and startup owners, there’s actually a strong one. Every startup launcher needs life insurance to ensure their business will succeed in the event of their death.
Why Is Life Insurance So Important For Startups?
Life insurance is essential for startup owners to ensure that if something happens to them, there will be enough funds to keep the business afloat. Moreover, life insurance is crucial for startups seeking venture capital funding.
VC funds don’t want to invest in something if there’s no safety net to protect their investment. Life insurance is that safety net. Life insurance will reassure potential investors that the business will be able to continue in case the owners die unexpectedly.
There Are Three Main Types Of Life Insurance That Every Startup Owner Should Consider:
Key person insurance – This is a life insurance policy that’s purchased by the company for a person who is essential to the business. The company pays the monthly premiums and is also the beneficiary.
Since not all startups have an immediate cash flow, startups may have a hard time purchasing key man life insurance due to lack of funds. However, once the startup starts bringing in regular revenue, a key person life insurance should definitely be considered.
No exam life insurance – As its name implies, this is life insurance that you can get without undergoing a medical exam. No exam life insurance is often a go-to for startup owners since it is usually approved much quicker than typical life insurance policies, plus the application can be made entirely online.
No exam life insurance is also great for startup owners who need a quick loan. Almost every lender will require life insurance to secure a loan, and no exam life insurance can be approved in days, whereas regular policies take weeks or even months.
Buy-sell agreement – When there are two or more owners of a startup, buying life insurance to fund a buy-sell agreement is a good idea. The partners will need to agree beforehand how much their shares of the company are worth, and then apply for life insurance for that amount. The beneficiary of the death benefit is the other partner.
The buy-share agreement stipulates how a partner’s share of a business me be reassigned in case of death, but in most cases, the agreements allow the shares of the deceased owner to be sold to the remaining partner. This is what the death benefit will be used for, and it’s another way of ensuring that the business stays afloat in the wake of a disaster.
Buying A Scalable Policy
Hopefully, your startup will grow. And grow. And grow. That’s the dream of every startup owner. And as your startup grows, you may find that your previous life insurance coverage isn’t enough. That’s why you should make sure to get a policy that can be increased with little to no hassle. That means that before you sign on any dotted line, physical or virtual, you should check with your insurance agent or an insurance advisor to make sure that the policy you buy can be increased if necessary.
This is true for any type of life insurance, whether it’s a key person, no exam life insurance, or life insurance to fund a buy-sell agreement. If you find a good policy that can grow along with your company, then you’re in business.
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