Five Scenarios That Keep Business Owners Up at Night

And How Insurance Solutions Can Eliminate the Stress

Business owners have enough to think about, ensuring their operations run smoothly. Recognizing how easy it is to get caught up in the day-to-day minutiae of running a business, most business owners have experienced those moments of waking up in the middle of the night when their minds race through worst-case scenarios, such as: What happens if I lose one of my valuable employees? What happens to my retirement if my business fails?

While thoughts like these always seem to creep into our minds in the middle of the night, the truth is that these questions are best answered in the light of day.

Here are five common scenarios that keep business owners up at night — and how insurance solutions can help keep you protected before they occur.

1. What happens to my retirement if my business closes?

In this worst-case scenario, the hope is that the owner is able to sell off part of the business and capture as much value as possible. Even if that happens, it’s unlikely the partial value received will be enough to fulfill the owner’s retirement needs.

Want a solution? Begin funding a cash accumulation permanent life insurance policy today. Depending on the plan structure, the owner may be able to accumulate enough policy value to use for supplemental retirement income, closing the gap between the proceeds from the partial sale of the business and what’s needed to meet the owner’s retirement income needs.

Important considerations to know: A personally owned policy is not a business asset and is not at risk if the business closes. The longer a policy is funded, the more cash value it will accrue, so the sooner you take action, the higher your chances of achieving your objectives and desired outcome.

Next steps: Take action today by reaching out to your licensed financial professional to learn more about the benefits of owning a cash accumulation permanent life insurance to help save for retirement.

2. What happens if I lose one of my valuable employees?

While every business owner understands the importance of retaining their most valuable employees, they also recognize turnover as a reality of the workforce. The most strategic business owners focus on developing compensation and incentive packages designed to retain their key employees for as long as possible.

Want a solution? Purchase a cash-value life insurance policy for the key employee and ensure that premiums are appropriately structured to fund the policy and create significant cash value. Define certain conditions that the key employee must satisfy (i.e., duration of employment, benchmark accomplishments, etc.) to gain unrestricted access to the policy.

This type of plan addresses two critical components:

1. It helps align the financial interest of the key employee with the success of the company.
2. If the key employee fails to meet the conditions for qualification or leaves the company, the business retains the policy and the cash value and can use them to replace the individual if necessary.

3. I’m a sole proprietor. What happens to my spouse’s retirement if I die unexpectedly?

For sole proprietors, businesses are often one of their most significant assets. This structure also means that if the owner passes away, the business most likely won’t survive. In situations involving a sole proprietor business, the surviving spouse may not be able to (or want to) keep the business going, and the business’s value might decline precipitously.

Want a solution? Purchase a life insurance policy insuring the life of the entrepreneur. The funds from the policy can serve as retirement support for the surviving spouse and/or eliminate the need to sell the business at a “fire sale” discount. If the sole proprietor doesn’t pass away while running the business, the funds from the policy can be redirected to provide additional retirement income.

4. I have business partners. What happens if I die unexpectedly?

A business owner with partners has to balance multiple factors, including their desires for the future of the business and their family. Without planning, your heirs may be at a disadvantage when trying to determine the business’s value and your ownership share. The surviving business partners may not necessarily have the funds to pay your heirs for your ownership stake.

No one, whether it’s your heirs or your business partners, wants to find themselves in a contentious situation in the event of someone’s death.

Want a solution? Consider a buy-sell agreement. This is an important document that provides a simple and clear path for addressing the premature or expected passing of a business partner.

A buy-sell agreement sets an agreed-upon value of each person’s ownership in the business. It obligates the surviving owners to purchase the deceased owner’s business interest from the heirs at an agreed-upon price. Buy-sell agreements are often coupled with life insurance policies, allowing the death benefit proceeds to be used as funds to buy out the deceased partner’s ownership interest.

5. I have business partners. What if one of them retires?

If one of your business partners retires, this may be an opportunity to buy the retiring owner’s ownership stake, increasing the remaining partner’s (or partners’) control of the business while providing the retiring partner the retirement income that they deserve. Without advanced planning, the remaining partner(s) may not have the funds to buy out the retiring partner’s share of the business.

Want a solution? Consider creating a salary continuation plan. With this strategy, the business purchases a cash-value life insurance policy and funds it with enough premiums to generate significant cash value. Then, when the partner retires, the policy cash values can be accessed by the business to make payments to the retired partner in exchange for purchasing their ownership interest back by the company. If the owner dies before the buyout is complete, the policy’s death benefit completes the buyout.

The Key Takeaway: Don’t delay your planning. As a small business owner, your business is your life. This is all the more reason to be prepared for every possible scenario and to ensure that your business can help you achieve a long and successful retirement. The sooner you take action, the higher your chances of achieving your objectives and desired outcome. Contact your licensed financial professional to learn more about the benefits of owning a cash accumulation permanent life insurance policy to help save for retirement.

At AIMCOR EIG, we offer a range of creative insurance solutions to help business owners navigate the unexpected. Get in touch with us today to learn more about how insurance protects business owners and their futures.