You have worked long and hard building and growing your business and the results are showing. But, what would happen if you couldn’t go to work tomorrow? Or ever?
You may survive but what about your finances and the business you created?
When two or more people are in business together there is often a buy/sell agreement in place. The agreement usually stipulates that in the event that one shareholder dies the others have to buy out their shares immediately. How does a company come up with that money quickly and efficiently? Do they have the liquidity? Can they get a loan from a bank? Insurance is an effective and cost efficient way to provide the needed funds in these types of scenarios.
What happens if the person who is driving the business suddenly dies, gets ill or becomes disabled? Will the company be able to survive the short term until it can find a replacement? Will they have the necessary funds to attract a replacement? Once again insurance is an invaluable tool to provide this funding at a much cheaper cost.
Tax Sheltering Profits
Clients with excess capital can benefit from sheltering this money inside of a permanent life insurance policy. The investment growth of this money is sheltered from tax and is eventually paid out to the client’s beneficiaries of choice tax-free. This can provide a significant gain for the clients heirs compared to traditional investment vehicles. In a corporate scenario the advantage is magnified as the life insurance proceeds (including investment dollars) can often be paid out of the corporation tax-free. This saves the heirs almost 40% in tax compared to other scenarios.