Hi, I’m Christina Wyatt, I am a Certified Financial Planner with Bauld Insurance, a locally owned and operated insurance company here in Halifax. Today I’m going to be talking about my ultimate favorite life insurance. I know it’s not the most exciting topic, but I can promise you having this conversation will save you in the long run.
Question for you. If you die tomorrow, is your mortgage or loan insurance to the bank covering your loans protecting them? Or is it protecting your business life insurance to cover your mortgages or your loans to the bank is owned by the bank and the beneficiary is the bank? I think that answers the question on who it’s protecting. Corporately owned life insurance can be purchased through the business paid for using corporate dollars, and the beneficiary is the business. When the insured dies and the death benefit is paid. It’s paid out to the capital dividend account so it can be used tax free.
You’d also be receiving the amount purchase not just what’s left owing. So with those banks, you pay for that large sum at the beginning covering the amount. But as you pay that down, they’re only going to pay out what you have left owing. When you purchase it on your own, if there are funds left over after paying out that loan, that money is for your business, you can also keep the coverage after the loan has been repaid. If your business still has a need for life insurance. You know if these are needed for loan collateral, the bank says that you need life insurance in order to get that loan: You can collaterally assign these and then it actually becomes a business expense not just using corporate dollars. Make sure these plans are set up correctly to protect you and your business.
One of the questions I asked when I’m sitting down meeting with business partners is that if one of them were to die, suddenly would they want to continue working with the other spouse? Buy / sell agreements for business partners are extremely important. If the unexpected were to happen and one of the business partners died, it’s going to lay out the terms on how the business is to be handled going forward. Like I said, Buy Sell agreements are great and extremely important. But if you don’t have the funds on hand to buy out a business partner should that happen. The Buy Sell agreement can almost be useless. Purchasing cost effective life insurance for the amount outlined in the agreement would solve this dilemma. A policy can be purchased through the business and paid for by the business on both business partners. So if either one were to die, the funds would be available to fulfill those Buy Sell obligations.
Question! If you die tomorrow, would your business continue without you? Would your spouse or a family member have to sell your business at a loss because they didn’t have the funds to keep things running while they transitioned? Is there another person who is so essential to your business that if they died, the business would be impacted?
You and certain others in your business are key people in keeping the business running. You can purchase key person life insurance on these individuals including yourself. The business is the owner and the beneficiary and the premiums are paid with corporate dollars. So if a key person or yourself were to pass away, the death benefit is going to be paid to the business into the capital dividend account where it can be paid out tax free or used for business expenses and other things to keep your business running. Because death benefits are paid to the capital dividend account. The shareholders could access these funds tax free or use them for business expenses. This provides much needed protection for your business and your family.
Visit our webpage to learn more about Health and Life Insurance protection available for business owners.
Other videos in this series for business owners: