This article was originally published on March 18, 2018, and has been updated.
Thinking about our own mortality is never easy.
As business owners, we’re among the least likely to think about mortality.
We’re often too busy working on the businesses we’re so passionate about.
I’m just as passionate about my business now as I was when I started. But I’ve learned a lot about why having life insurance in place for your business is so important.
In September 2018, I celebrated 20 years of working in financial planning.
Those two decades taught me how life insurance can ensure the future of your family and business.
I want to share this story with you for several reasons.
First of all, I am overjoyed that I still qualify—from a health point of view—for $1 million in life insurance for my business.
(I’ll get to WHY I chose $1 million in life insurance for my business in just a minute)
I don’t have serious health issues, but I’m not getting any younger and with age comes increased likelihood of health challenges.
This is just one of the reasons I wanted to get this life insurance policy implemented inside my corporation as soon as possible.
But there were other important reasons on my mind, too.
Here’s what it comes down to: My team and I have big plans for the future. Life insurance will ensure these dreams become a reality—with or without me.
These dreams include launching a fun financial literacy course in partnership with renowned comedy writer and musician Trevor Strong, who I want to thank for his tireless injection of humour and fun into what is often rather dry material!
Also, I want to help bridge the gap between how Canadians spend their money in terms of philanthropy, and how they are currently spending it.
Those needs are not currently being met by many financial advisors, and I think it’s important to shift that paradigm across our industry and our country.
My team and I have also worked on addressing the financial planning needs of couples. Through a tailored course that supports them to focus on their strengths, they can improve their relationship with each other and their money.
Ensuring these projects will continue even if I’m not around is important to me. I take comfort in knowing they’ll receive the support they need to come to fruition.
I have an amazing team of professionals working alongside me.
Stopping and asking myself what would happen if I died is an example of “practicing what I preach” to them.
I, like most business owners, can get so caught up in my vision for the future that I often don’t consider how things could fall apart if I were to die prematurely or become critically ill.
(I also have a substantial amount of critical illness insurance in place, you’ll be happy to know!)
Even addressing a succession plan can be a challenge given all the sweat, tears, and time we’ve poured into our businesses and the relationships that accompany them.
Imagining someone else taking over what we’ve worked so hard to build becomes incredibly difficult, and yet, it’s a much-needed exercise.
Part of this exercise is deciding how much life insurance to buy for your business. For me, that number was $1 million.
Here’s how I decided on a million dollar life insurance policy.
When I assessed my needs in 2018, I thought about what it would cost to do the following:
- To provide an initial payment to my spouse as part of the purchase agreement in transferring the ownership of my business to my successor.
- To ensure that there would be sufficient funds to pay everyone and keep my business running through the transitional period, while ensuring the money would be there to get the fun financial literacy course and the couples course successfully launched and maintained.
- To provide the resources to meet our goal for 2018 of implementing 100 charitable giving life insurance policies, which will simultaneously raise $5 million for charitable organizations that we’ve already partnered with.
When I quantified all that work, it added up to one million dollars of life insurance coverage for my business, a policy that is now owned by my corporation.
Because my corporation is also the beneficiary, approximately $450 in premiums can be paid by my business every month.
Pretty cheap, when you think about everything that money can accomplish!
Now, on to my questions for you…
- Have you thought about your succession plan, and is business life insurance part of that plan?
- Have you thought about the impact on your business if you were to die prematurely?
- Most importantly, do you have the money to make your business dreams a reality, even if you’re not there?
Let me know in the comments below!
To help you answer these questions and more, seeking the help of a financial planner can make a world of difference.
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