When entrepreneurs go looking for life insurance, they need to take a number of things into account: which policy will benefit my beneficiaries the most after I’m gone? Which policy will provide the most value for my money? And – more specifically to the entrepreneur and business owner – which will help me to achieve my entrepreneurial goals in life, and even in death?
For every entrepreneur, life insurance is a must, as it helps to facilitate the running of your business – or businesses – when you’re gone. Not to mention, life insurance provides security to clients and investors, who will feel safer investing in your business, if they know that – even in death – there are measures in place to keep your business moving.
In addition to providing this vital cover, cash value life insurance comes with the added perk of being useful to you while you’re living; the cash value aspect of the policy – affectionately called the ‘living benefit’ – can be accessed while you’re alive, and is accumulated from a portion of the premium you pay each month for the life insurance policy.
But how can having a cash value life insurance policy benefit you as an entrepreneur?
You can use the cash value portion of your life insurance as your own personal bank.
As mentioned before, the cash value portion of your life insurance policy can be used while you’re still alive, and many entrepreneurs choose to take advantage of this, and choose to use it as their personal bank.
One of the key advantages of storing your savings in your ‘cash value’ kitty, is that the rate of interest is – typically – significantly higher than it would be from a conventional bank account. Namely, cash value life insurance providers offer a 4-6% interest rate, making it a great place to store – and grow – your money.
Moreover, the money stored in ‘cash value’ pot is eligible for all kinds of tax benefits. For one, you can take out large sums from your policy without being taxed – the only portion that is taxable is the interest you earn on top of the premiums that you’ve invested in the policy.
Additionally, if you’re inclined to think that income/estate taxes are going to increase, you can shelter your wealth from these taxes with cash value life insurance.
All of these things are important to the serious entrepreneur, as growing – and being smart with – your money is one of the most important rules of entrepreneurship.
You can take out loans against your policy – without paying taxes on the loan.
Just as you don’t have to pay tax on a personal loan, loans taken by the entrepreneur against the cash value life insurance policy – for business purposes, or for anything else – aren’t taxed, and usually have lower interest rates than other loans, saving you business expense, compared with if you took out a business loan from a traditional bank.
More than this, loans taken out against your cash value life insurance policy are much more flexible than other loans, as – since your cash value is used as collateral – you don’t necessarily have to make payments every single month.
So, if business isn’t too good for a period – as is sometimes unavoidable in the world of entrepreneurship – and you’re a bit short on cash, you’re not forced to make a payment that you can’t cope with.
Lastly, loans taken against your life insurance policy are easier – and quicker – to obtain, as they don’t require the credit checks that loans from traditional banks do, since the loan is financed by the policy, and the cash value aspect of the policy provides sufficient collateral for security.
Life insurance is imperative for ensuring that your legacy continues, even when you’re gone.
While this isn’t unique to cash value life insurance, it’s one of the most important benefits to entrepreneurs with a business they want to protect – even if they’re no longer around to run it.
For example, if you have a business partner, a life insurance payout can aid them to ensure that your shared dream stays alive, as it provides the financial cushioning required to compensate for the loss of your presence within the business, and help to ease the stress of the re-hiring process, if your business has a hope of moving on without a key person there to run it.
Additionally, life insurance can help to cover any outstanding costs or debts associated with you and your business, including any outstanding loans, credit debt, salaries owed, tax obligations and property-related debts, such as the mortgage or lease for your business property.
If you’re looking to boost your entrepreneurial game – and to make the most out of the money you have – consider investing in cash value life insurance, to recapture the control of your capital, grow your earnings, and take advantage of the tax benefits that a cash value life insurance policy offers.