“Cash value life insurance plays a massive role in financial institutions, corporations and banks…. Not only does it increase their financial stability and reduce their taxes, it is an ideal place to fund employee pensions, healthcare costs, and other benefits.”– Jake Thompson, Money. Wealth. Life Insurance.
Cash value life insurance from a mutual company is one of our preferred easy of saving money. That’s because you get the power of compounding growth, leverage, and rock-solid guarantees.If you’re a business owner, or think one day you want to be, life insurance can be a valuable asset. However, there are myths about life insurance for business owners that we think are worth addressing.
Myths About Life Insurance for Business Owners
1. Myth: Life Insurance is Only for Big Businesses
Spoiler alert: life insurance is an ideal asset for nearly anyone. Individuals can establish a policy with as little as $50 a month—and though the face value might not be very large, it will help you establish better savings habits. If you’re hoping to one day start a business, cash value can act as leverage for loans, and help you start off on the right foot.
While it’s true that big businesses and corporations, like banks (read about BOLI here), buy large amounts of life insurance–they aren’t the only ones who can benefit. Don’t let your starting capability keep you from partaking in the benefits of insurance.
2. Myth: Term Insurance is All You Need
While term insurance may have a place in your strategy, like insuring up to your full “human life value,” banks use permanent life insurance for a reason. That’s because permanent insurance has lifelong benefits–more than just the cash value component. The liquidity and leverage are invaluable to banks, and the insurance even helps them to fund employee benefits programs.
In the long-term, term insurance is often an expense for corporations and banks, because it only achieves one purpose. On the other-hand, permanent insurance offers short-and-long-term benefits to the company and their employees.
3. Myth: Only the Business Owner Needs Insurance
While insuring the owner of a business is certainly a priority, they are not the only person to benefit from insurance. Nearly any business owner, regardless of the size of the company, can multiply the benefits and protections of insurance by extending coverage. You should consider insuring your business partners and key employees. You’ll need their consent, however insuring employees and partners benefits all involved.
Why the Myths Matter
Whole life insurance acts as the ideal financial foundation, because it provides certainty–you’ll have guaranteed growth, you won’t lose dollars, and you won’t be denied access. These traits alone give you more freedom to take risks—like starting a new business. As a business owner, the benefits can be multiplied, even if you start small.
There’s a notion that whole life insurance only works for some people (or worse, universal life is mistaken for whole life). However, anyone can be successful with the right foundation and the right knowledge.
If you’d like to consult with a Prosperity Economics Advisor, get in touch here. Now that we’ve addressed the myths, tune in next week when we dive into the specific ways your business can benefit from whole life insurance.