Business Insurance Agents

A term life insurance policy is often referred to as pure protection, since all you are buying is a death benefit. In a way you are renting protection for the term or life of the policy, say 10 years. If you die during that time, the policy will pay its death benefit.

To make a term insurance policy marketable there are a few elements that make it more like renting an less like “pure” protection.

The premiums are level from the day you buy it until the end of the term. If you actually paid the real corresponding costs your payments would rise each year. In that case, if there was any chance that you could be convinced that you no longer needed the insurance, you would drop it and the company would not make very much money.

Most term life insurance policies are guaranteed renewable before or at the end of the initial term. Insurance companies know that your needs for insurance will last for as long as you live, so they want you to keep paying for insurance far beyond that initial term period.

The benefit to you of the renewable feature is that you don’t need to prove to the insurance company that you are still “insurable” in order to keep the term insurance policy in force for a longer period than the original term. Naturally, each time you renew, the premiums will be higher for the next period of years because you are older and, therefore, more likely to die.

Another feature, convertibility, is usually part of the policy as well. In my opinion the convertibility feature is vital and something the terms of which must be clearly understood by you and your advisors in order to make sure the policy is a flexible as you will need it to be.

The convertibility feature means that the term insurance policy can be exchanged for another type of life insurance usually at any time before the expiration of the policy’s term. Buying a convertible term life insurance policy will put you in control since will be able to convert to a permanent type of coverage at a later time, without having to prove that you are still insurable.

Usually people choose term insurance for protection when the need for it is only temporary, such as mortgage protection, business bank loans and trade account protection required by a vendor, or perhaps as income replacement when their children are young. There are times when the requirements for immediate cash protection in order for them to keep the commitments they have made if they were to die make term insurance the only possible solution.

In other words term life insurance is a permanent solution for a temporary need. And it is a temporary solution for a permanent need.

You can figure out how much you need and get a quote online. You can buy term insurance through the mail and never have to speak with an agent. The Internet sets you free to get what you want when you want it and pay almost whatever you want.

The question is, does that make the most sense for you, your family and your business? Isn’t it possible that a trained agent who has spent a lifetime helping people like you will have insights and experiences to share that you can benefit from? Remember, when you buy life insurance commissions will be paid to someone. Should that be a wholesale aggregator with a web site or a trained professional you trust who has to look you in the eyes for as long as you all shall live? You decide.

Remember, term life insurance is like wetting the bed, it provides instant relief but sooner or later you are going to have to get up and do something about it. I remember the first time heard that expression. Now that thirty years have passed I understand what he meant.

If life insurance is ALWAYS the answer, what’s the question?

The question is, “what is the most effective way of adding cash to your business, at the most inopportune  and often the most unexpected time?”

When someone dies, usually a surprise to everybody, cash is required. It’s required to repay loans, it’s required to replace a key person, and it’s required to pay taxes.

Make no mistake about it, cash will be required and it will have to come from someplace.

Where will the cash come from? Will someone drop off a check, will you simply take the cash out of savings, or will you have to raise the money some other way?

In over three decades working with business owners I can count on the fingers of one hand the number of people who had the liquid assets required to pay all the bills.

If you are one of those rare individuals I salute you. I am sure that sort of financial security did not happen by accident.

Let’s face it, these people had to be successful enough to make enough of a profit (after income taxes) to save enough money (taxes again?) and have enough time for it to multiply - thanks to the miracle of compound interest.

Does it make sense to use these dollars - that were so hard to create - to pay taxes and loans? Especially when they could have bought the dollars they would need for these expenses, for literally pennies apiece.

This article is not for those fortunate few, since they are few and far between and have no doubt figured this fact out for themselves anyway.

For the rest of us, what should we do? Well maybe we can raise enough money at a moment’s notice, maybe tomorrow, to pay all the required expenses resulting from a ‘premature’ death.

How’s that going to work out? If you are like most business owners at least 80% of all your assets are tied up directly or indirectly in the business. These assets are being used by the business to generate your revenues.

Sell one of these assets and its corresponding ability to help your business generate revenues is taken away forever. So selling an asset that is currently part of your company’s backbone - in order to give the money away to the tax man or your banker does not make common sense, much less financial sense.

Why not borrow the money to pay debts, taxes and other final expenses? That’s the ticket!

You have excess income now so - borrow the money to pay the taxes, pay the mortgages, pay off your partner’s widow, then pay it all back plus interest from future earnings. Sounds about right doesn’t it?

But just to make sure, go to the bank in the morning and run this by your banker. Ask how this scenario would work out. Have the banker add up the numbers and then sign a contract guaranteeing that they will loan you or your family the money, no matter what the state of your business is or when the need arises.

This is a way to see just how confident they are about your ability to make this work. What do you think your banker will do?

If your business is incorporated maybe you can raise the money to pay taxes, mortgages and buy out your fellow shareholders stock - by selling some of your stock in your company.

Now you can’t sell so much that you lose control of the business. Just sell a minority interest and you’ll have the money you need and you won’t have to pay it back.

Be serious. Where do you think you’ll find someone willing to pay cash for a minority interest in a privately owned company that has never paid a dividend? Anyone that naive is not going to have the money - unless they inherited it. Is this the sort of person you want for a partner to help you grow your business in the future?

There are lots of scenarios. Actually I feel silly making the above suggestions. You and I both know you would never have been successful in the first place if you believed any of them are really actionable, practical, or viable.

Don’t panic. Maybe there is another solution.

Ask your spouse to call your lawyer and set up an appointment - without you. At the meeting tell the lawyer you died the night before and it’s critical to get a handle on the current situation.

How much cash will be required, when and by whom? What about your partner and what are the cash requirements to continue the company into the future the way you would have wanted it?

If you have successors and key employees and managers - what will happen to them and their security and can the business afford to hire a replacement for you, meet the cash obligations, and have enough money left over for your spouse?

But you’re not going to do that are you? You do not have the courage. And if you did, would your lawyer’s advice pass the sniff test? Is it the advice they would give their spouse?

In my experience there are many ways, some complicated and some simple, through business and estate planning strategies to reduce your future liabilities. If you have enough time that is.

There are lots of planning possibilities if you start soon enough and have long enough for the planning to work.

Life insurance buys you the time you need!

So, let’s cut to the chase. Before the sun sets tomorrow, talk to a life insurance agent you trust!

It’s critical you trust them, so you’ll be willing to tell the truth about what you owe, what you own, and what commitments you’ve made.

If they are experts in estate and business planning for people like you, great! They will have ideas that have worked for people you can identify with - people you can call on the phone.

And if they are not an expert in business and estate planning, it’s not important it. In fact if you are the only (or largest) business owner they know - it’s not important, if you trust them.

I guarantee you they’ll have someone in their organization, someone they trust, that is experiences helping people just like you solve problems just like yours!

They have seen it all before. You think your business is unique, wrong. You think your family situation is unique, wrong again. You think you, your partners, and your key employees will live forever - or at least until you have everything set up, you’re delusional.

It’s my bet that your trusted life insurance agent will be the most valuable part of the whole planning equation.

Not only have they seen what works and what doesn’t, not only do they have dozens of products that can be massaged into liquidity producing instruments, they are the only people on earth who can guarantee you that your business will have the money it needs - the very moment it needs it.