Operating any business carries risks, but small-business owners can get hit especially hard when an unexpected problem arises. That's a compelling reason to conduct a review of insurance needs as part of the start-up.
To help minimize risk exposure, Byron Udell, founder and chief executive officer of Illinois-based AccuQuote, is sharing his insurance expertise with entrepreneurs who are starting their own businesses. A provider of term life-insurance quotes to customers across the nation, Udell says many entrepreneurs and business owners underestimate their need for coverage.
“If your business was worth building, it must be worth protecting for your family and your employees,” he says.
Every business owner’s financial plan should include five key types of coverage, says Udell: term life insurance, key-person life insurance, a buy-sell agreement, disability insurance and group insurance.
Term life insurance can repay a business loan if the owner dies unexpectedly. That way, any outstanding financial obligations are met without the business suffering. The same concept holds true for key-person life insurance. That type of policy views a company’s key employees as its most valuable business assets.
“If any of them were to die prematurely, your business could suffer a financial loss. This loss can be covered by key-person life insurance,” Udell says. “The proceeds could be used by your company to help offset the lost production, as well as to find and attract a replacement.”
Business partners typically have a buy-sell agreement, a policy that allows one partner to buy the business should one of them die unexpectedly.
“If you have one or more partners, and one of you dies, how will your interest in the company be bought out? Where would the funds come from? Does your company have the cash flow to fund a buyout of one of your partners now?” Udell asks.
AccuQuote’s Web site (www.AccuQuote.com) includes a term life-insurance calculator to help business owners determine how much coverage to buy, a glossary that explains industry terminology, a collection of articles that cover the basics about life insurance and a blog that answers many questions about life insurance.
Disability insurance is just what it sounds like. If the business owner is unable to work because of disability – which is four times as likely to occur than dying before age 65 – the policy will disburse monthly payments to keep the business and the owner's family from going into debt, Udell says.
Finally, a group insurance plan typically includes health, dental or life-insurance coverage for employees. In addition to these, many more types of insurance can protect small businesses against damages.
Some problems, Udell says, “only insurance can solve.”