Most business entities will not hesitate when seeking insurance to cover their material assets against unforeseen risks like fire, flood, theft and other damages.
However, it’s common for owners to mistakenly overlook insurance on human resources – an incredibly important part of a company that also deserves protection. Business life insurance solves this problem by providing cover for key employees or business partners.
In this article, we’ll discuss the five main types of business life insurance policies you can buy today. These are relevant life, key person, employee benefits, business loan, and shareholder protection.
Let’s expound on these types of insurance below:
5 Types of Life Insurance Policies
1# Key Person Insurance
Does your business have a key staff member whose sudden death can significantly affect normal operations? It’s a terrible thing to think about but sadly sudden unexpected deaths occur regularly and can be a devastating blow to a business.
It’s terrible trying to deal with the grief of losing an important employee but having to deal with the extra stress of trying to fill their role makes the whole situation even worse.
Taking out a key person insurance cover however can help protect your business from taking a big hit due to the gap left in such a situation.
The policy aims to protect employees of high value to a corporation whose sudden departure can affect business success or stability.
So, how does it work?
When the insured key person passes away or resigns prematurely due to a critical illness, your business qualifies for compensation to cover the lost value. The funds can help you find a suitable replacement to place the business where it was before the loss of the human asset.
2# Business Relevant Life Insurance
An effective way to show empathy and boost the productivity of your employees is by covering them against life risks. Business relevant life insurance allows you to provide death-in-service benefits to those who depend on your workers for livelihood.
The policy pays the assured sum in a lump sum to the dependents of the covered employees in the event they depart while working for you. The payout amount depends on factors such as the employee’s age, lifestyle, health status, and salary.
All that’s needed is to ensure that the employees you wish to insure have valid contracts of employment for them to be eligible for coverage.
3# Business Loan Protection
Most businesses rely heavily on loans to increase their working capital or purchase more assets. Before granting this help, financiers ask for some form of security or a guarantor.
A guarantor can be a major shareholder, founder, or a director with direct involvement in the business. So what if they suddenly pass away and the lender demands the loan repayment?
This is where business loan protection comes in to help the company repay the outstanding loan without touching the assets of the departed guarantor.
4# Shareholder Protection
A shareholder is a vital part of the routine operations of a business or organization. Shareholder protection insurance exists to maintain stability in business environments when major shareholders pass away.
The policy provides the necessary funds to buy the shares from the deceased shareholder. With this, it prevents a succeeding party with no business experience or expertise from taking over the company. It is a measure against shareholder successions that can threaten the future of the business.
5# Employee Benefits
Most businesses prioritize the protection of assets, key human assets, and shareholders. But what about the regular employees who also add value to the entity? Well, the employee benefits policy exists to fix this problem.
This cover provides financial assistance to those depending on your workers should they (employees) pass away suddenly or are diagnosed with a serious illness. The idea is to make your employees feel valued and protected.
The benefits exist in various forms but there are three major types, namely life cover, income protection, and critical illness cover.
Life cover provides financial assistance to the beneficiaries when the employee passes away in the line of duty throughout the employment contract. Income protection cover offers regular monetary support to families of the deceased or incapacitated employee the funds to act as a replacement for lost earnings.
Finally, critical illness cover offers financial assistance to cater for medical bills and other expenses that arise when an employee falls critically ill.
Businesses must ensure their survival by employing proper risk mitigation measures especially when it comes to their human resources.
The above-discussed business life insurance policies can help minimize the impact of losses stemming from deaths, resignations, debts, and other risks that exist in business environments.
Have any questions on business life insurance? Feel free to ask in the comments section below and we’ll be happy to advise. You can also share your experiences if you’re already using this cover in your business.
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Author: James Miller