1 July 2021
By Brighter Life Team

How to ensure business longevity with the right financial protection plans?


The COVID-19 pandemic has forced many businesses to readjust their operations and strategies in order to survive and thrive in the new normal. As the paradigm shift in consumer behaviour and business models is already underway, it is only natural for business owners to start thinking about ensuring their businesses will continue to stay protected amid uncertainties.

Business owners who strike the perfect mix between risk and innovation will have a leg up on competition that will enable them to recover faster in the face of adversity. To achieve this, a strong financial foundation is critical. This is where the right insurance protection plan will serve as a valuable financial tool for businesses. These protection plans are flexible and able to secure not only the business itself but also employees and investors.

From business succession to retirement planning, here are five financial plans that every business owner must secure:
Key Person Insurance
Key people are those whose death or disability will result to significant financial losses to the company, which include the owners, salespeople with key accounts, and employees with specialized skills. Since the beneficiary is the company, it can use the life insurance proceeds to pay for operating expenses and other liabilities. Some may utilise the money to cover the cost of hiring and training new employees. In essence, Key Person Insurance protects the value of its policyholder to the business and its operation.
Insurance for Debt Cover
Proceeds from the life insurance policy can be used to pay off debt.
Insurance for Buy-Sell Agreements
Here, the proceeds will be paid to the family or estate and a buy-sell agreement ensures that the shares are valued fairly. By purchasing the shares of the deceased partner, the ownership of the business is secured and ensures that the company will continue to operate smoothly.
Personal Retirement Plan
One of the reasons that founders find it difficult to delegate management control is because their retirement depends on the company’s performance. Take some time to determine how much money it will take to fund your retirement or second-career dreams. By having a separate retirement fund, the owners can now focus on their hard-earned golden years while letting the next generation take the helm.
Insurance for Estate Planning
Younger business owners don’t always feel that estate planning is necessary; but failing to make a plan could put their business and family at risk. The businesses will greatly benefit with proper estate planning. Since their money is tied to the business, they may not have the needed liquidity to pay for estate taxes upon the owner’s death. With estate taxes taken care of, the bereaved family will be relieved of the burden of funding. The business remains intact and continues to operate.

Building a successful business is not an overnight affair – it takes years of hard work and having the right strategies to ensure both the business and wealth can be passed on to future generations. Remember, the future of your business relies on sound financial planning that includes getting the right insurance coverage that will help your business get back on track after disruptions.

Want a second opinion on the right financial plan to keep your business protected?  Be sure to speak to our sales advisor today.

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