Too Many Entrepreneurs Forget the Importance of Life Insurance
The hope of every business person and entrepreneur is to achieve success and independence, to one degree or another. To this end, these individuals can become single-minded, pouring endless energy and focus into the task at hand. While this can generate a great deal of income, and build security for the future, it’s also a vulnerable time in the life of entrepreneurs – take caution
About 6% of Americans own a business that provides their primary income. For these people and their families, their business is the lifeblood of support and success. For many of these individuals, failure in the business would ruin the family’s finances. This is the sort of vulnerability that is typically considered when talking about the early risks of a business venture. But another, and the more devastating, would be the unexpected death of the person running the business.
It’s common for young, healthy, successful people to forego life insurance. It makes sense, after all, only 192 people out of every 100,000 Americans dies between the ages of 25 to 44. And while those might seem like good odds, the outcome of the sudden death of a business owner and familial provider is scary to think about. Is saving money on life insurance by avoiding it completely worth the worry that your family won’t be provided for if you aren’t around? To answer that question, it’s important to understand what is available.
For all but the most successful business owners (more on you later in this article), some form of term life insurance may be adequate for your needs. Term life insurance is insurance that you buy for a predetermined period of time. In annually renewable life insurance, you extend the policy once a year, always careful to make sure that it doesn’t lapse.
Most other forms of term life insurance set a range of time (5, 10, 20, etc. years), and charge monthly fees that keep the policy active as long as the policyholder maintains payments. It’s possible for these policies to be very simple, very affordable, and very tailored to your personal needs.
Let’s say, for example, that you only want to get life insurance for the first five years of your business. You choose to do this because for that length of time, you have to travel twice a month. This increases your risk of accidental death, despite your relative youth and fitness.
A simple term policy could cover you and your family for this amount of time with very little cost to you, costs being variable depending on the age and health of the policyholder (which account for the likelihood of the policyholder’s death before the end of the term). This is an excellent solution for people who don’t want very long-term coverage, or who may have a unique risk factor that will not be present at a later time.
Of course, once you have coverage it’s hard to give it up. Mortality risks only escalate with age. What’s more, if your business goes on to be successful in the long term, it is likely that you will have a complicated financial situation that’s largely dependent upon you living and breathing. For these individuals, more complex life insurance and savings/investment hybrids are available in various universal life insurance products.
Whichever option you choose, life insurance is an excellent choice for entrepreneurs with families or other dependents. There is much in the life of the entrepreneur that is outside of his or her control. The ongoing safety and security of their family should not be one of them.