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Why business owners should consider life insurance

Every business owner who has achieved any level of success knows that building a viable company requires dedication, commitment, hard work and maybe even a little luck. For most, it takes years of sacrifice, discipline,and consistent focus; not to mention blood, sweat and tears.

How can you fail to plan for the effective transition of your business; the one thing you have dedicated so much time,energy, heart and soul to? Let us help you ask the right questions and develop your business succession planning strategy.

Why would life insurance help in my business succession plan?

Let’s take a look at four situations where life insurance can solve some pretty big problems that can arise in the succession of a business.

Death of a key person.

The smaller your business, the more critical you’re likely to be to the success of the business. What if you were gone tomorrow? What if another employee – perhaps your most important employee – dies suddenly? Having insurance on the lives of key people in your business will provide cash to the business that could be critical to smoothing over a rough period, or even keeping the business afloat, while the rest of the team looks to find a successor. No wonder many lenders, and investors, require companies to carry key person insurance.

Equalizing an estate.

If you own a business and have one or more children, but
not all of them are working with you, you need to consider what
would happen if you passed away. It often makes sense to
leave the shares of the business to the child, or children, who
are working in the business day to day. The reason is that the
children who are not working in the business would likely have
different objectives; they may prefer to receive dividends from the business rather than see all
the profits reinvested each year, while those working in the business may have a different
perspective. A better solution may be to leave the shares to the children working in the business
and equalize things by leaving the other children cash provided by an insurance policy.
The insurance premiums may be a small price to pay to maintain harmony in the family
when you’re gone.

Covering taxes on death.

At the time you pass away, you’ll be deemed to have sold, among
other capital property, your private company shares. While you
may be able to claim the lifetime capital gains exemption, to
shelter up to 848,252 of the capital gain if the shares qualify, you
could end up paying approximately 25-per-cent tax on any capital
gains that a gains that are above and beyond the exemption. How will your
executor pay that bill? Life insurance plays an important role in
allowing your executor to be able to pay your final tax bill.

Efficient transition of ownership and control of the business.

Smooth transition of ownership is critical to the continued success of
the company. When an owner passes, considerable uncertainty can
permeate an organization. Therefore, preparation and proper
execution of a succession plan can have a huge impact on future
success of the business. A business can be dramatically affected in
a number of ways if one of the owners is no longer there: 

  • How is the business going to replace the owners contribution to the company?
  • How long will it take to find a replacement? And at what cost? 
  • Will funds be available to buy-out the deceased owner’s estate? What is their equity interest? What is the value of the company? 

When there are multiple shareholders, a buy/sell agreement funded by an insurance policy can answer all these questions and solve many succession planning needs.

Ask yourself the following questions and let’s start the conversation to make sure you have the right
succession plan (and coverage) in place today. 

  • Is there an existing plan in place? When was the last time it was reviewed and updated? 
  • What are your personal goals? How long do you want to work? 
  • How are you going to replace income when you retire? How will you maintain your lifestyle? 
  • What is the business worth? How are you going to get maximum value for the business? 
  • What is your desire for the business if you died or become disabled? 
  • Who would manage the company in the short-term? Who would eventually own the business?
  • Is the company going to pass to your family members or will the company be sold to a third party? 
  • If you are a one owner company, does your spouse know anything about the business? Have you communicated to your spouse or key employee what would happen if you died?
The mortgage lender
Pay off mortgage
With your mortgage payment
The mortgage lender
Often underwritten at time of death
Not neccessarily guaranteed
Usually not available
Often same rates given, regardless of other factors
Benefit decreases as mortgage paid off
If you move, the insurance ends You will have to requalify
Can only cover the mortgage
Decreasing Term
Anyone - you decide
Beneficiary decides
Invest? Pay off mortgage?
Monthly, semi-annually,annually
Get level benefit Or lower benefit overtime to match yourmortgage
Underwriting at time of application
Fully guaranteed
Premium based on gender, smoking, health, lifestyle
Preferred underwriting available
Individual policies can be customized
Deal with licensed advisors
Insurance stays with you - even if you refinance or change lenders
Take care of all insurance needs with one policy
Term or Permanent
Payment Frequency
Other Life Insurance needs
How Insurance will be used
Your best options are available through an insurance brokerage.

Let's Compare!  
Type of Life Insurance
Benefit Level
Underwriting Time
Premium Rates
Premium Guarantees
Options and Riders
A needs analysis will take a look at the whole picture and help us determine a plan to suit your needs. A customized insurance plan will put the control where it should your hands.
Now you know the facts, but how does this all fit together?
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Business succession planning that’s simple, easy, and clear.
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