When people think of life insurance, the financial security that it provides to families when a loved one dies may immediately come to mind. But life insurance extends beyond home and hearth. According to FinancialWeb.com, professional life insurance offers financial benefits to a company due to the death of a vital employee and to protect the heirs of a business should its owner die.
Continuation of the Business
When the owner of a sole proprietor business (an unincorporated form of business that is owned and managed by one person) dies so does the business. FinancialWeb.com says with proper planning professional life insurance can help supplement the loss of business income due to the death of its owner. Without such foresight, the business may have to be liquidated for possibly pennies on the dollar of its value to meet the costs of settling the estate.
Increase in Options
According to State Farm Insurance, professional life insurance has benefits that go beyond preventing the liquidation or sale of a sole proprietor business. It may also keep survivors from feeling obligated to get involved in the business in order to maintain its operation. The funds derived from life insurance may also be used to help a qualified employee or similar individual purchase the business.
Keeps the Business Stable
According to the Insurance Information Institute (III) the death of a key employee in a business can rattle the stability of the company, especially if he had managerial duties and/or is the primary go-to person for suppliers and customers. When a critical employee dies the quality and efficiency of the operation may suffer and could lead to a drop in profits. A company may take out a professional life insurance policy on a key employee to ensure it is financially protected should the worker die or become disabled. The policy is typically owned by the business and it is listed as the beneficiary. The amount and cost of key person life insurance varies depending on the specific duties of the employee, his age and his overall health.
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