When you are a small business owner, your family members aren't the only people depending on you. You have employees, partners, and all of their families that would be significantly affected if something should happen to you. Not to mention that the company that you have worked so hard to build could be destroyed.

In a nut shell, that's the short explanation of why a small business owner needs life insurance. But there's a lot more to know, so let's go over the main points.

Why You Need It

Your family depends on the income from your business to survive, and pay the bills. You might have taken out loans backed by your family's assets to start or grow your business. But your family members might not be equipped to take over the business suddenly if you die. Do they know the in's and out's of how the business operates? The clients? The vendors? The finances? They might also be unable to sell it easily. This could leave them without income or even in a position to lose their home, if that's collateral for a business loan. When a family is forced to sell a business quickly, they may have to sell it at a discount or during market conditions that make the business less attractive. In other cases, the business may be worth very little without the proprietor or partner if they were a key person to the business.

If you have partners, your family might be unable to step into your role, and your partners might have a hard time buying out your share. This could leave your family with nothing to show for all the hard work you've put into your business. They could also find themselves in a position of having to help run the business during a very stressful time for them or be forced to sell off the company. If your business relies on a key person (whether that's you, a partner, or a key employee), and their death would seriously dent your earnings or operations, this is a serious risk that you want to protect your business from.

The Solution

In each of these scenarios, life insurance could save your small business or protect your family's interests. Each scenario involves a different sort of policy, depending on how your business is structured and what your needs are.

A personal life insurance policy would help your family pay off any business debt that might exist, and cover living expenses after you're gone. Your family would then have time to figure out what to do with the business and not have to make such a huge decision under stress.

If your business has multiple owners, you can combine life insurance policies on each partner with a buy-sell agreement. The agreement stipulates that on the death of a partner, the remaining partners can buy out the surviving family's share at a previously agreed upon price. The life insurance policy pays for the buyout.

Key-Person life insurance is a life insurance policy that protects against the death of a critically important person to the business. In the event of death, the insurance pays the owner or owners of the business.

The life insurance solution that's put in place for you should be customized to fit your specific needs and to facilitate the business's as well as your family's future success.

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You've worked so hard to build your business. Now protect all your hard work for you and your family. Call Tenaya Insurance Services today at 925-322-8073.

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