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Why Buying Term Insurance is Vital for Entrepreneurs/Businessmen?

By PolicyBazaar
  | Published: 07 December 2020 | Last Updated On: 08 February 2021

Buy a term plan and secure your family

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AED 100,000 cover starting at just AED 7/month

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Life insurance seems like a waste of money when that amount could be invested in multiple different ways in order to multiply it. This is a common ideology among most people, especially entrepreneurs who want to double their money at every opportunity they get.

However, this strategy will work well until you encounter an unfortunate event. What then? What will happen to the new business that you have just set up? Will an unforeseen occurrence be the cause of shutting down the business that was built from all your life’s savings? What will happen to your employees who rely upon you for their next month’s salary? But more importantly, what will happen to your family when you are gone?

These questions do seem gloomy and no one wants to think about such dreary thoughts but evading the questions about death, sickness or disability will not erase the fact that they are inevitable and can happen to anyone.

While it is important to stay positive but it is equally important to prepare for the worst-case scenarios of life. Knowing the weak points of your new business will help you not only deal with them but also help prepare a contingency plan for times when you can no longer take care of everything. One major aspect of this contingency plan is buying term insurance.

What is Term Insurance?

One type of life insurance is the term insurance policy. This policy offers coverage for a defined period of time known as the “term.” It is popularly known as the purest form of a life insurance policy. In the event of your unfortunate demise, this policy gives a pre-decided death benefit to your beneficiaries. The primary aim of this life insurance policy is to offer financial support to you and your dependents in unfavourable circumstances that lead to the loss of income.

These policies guard against any financial strain that might befall your loved ones in your absence. By insuring your life, you will not only be able to protect your family but also your business that will be able to grow even when you are no longer around.

Let us look at some important reasons why getting term insurance is vital for entrepreneurs and business owners:

Critical illness: Buying life insurance becomes important in light of any sudden illness that might make it impossible for you to run and guide your business appropriately. A stroke, cancer, or physical disability might take you away from mentoring your business to new heights. A lot of businesses have suffered enormously due to this oversight on their owner’s part.  

Protect the business name: Every business owner puts in so much hard work, financial resources, and passion into their business. As a consequence, they want to religiously protect it at all costs, especially after their demise. Your business is a reflection of you and your diligence and it is something you want to be remember for. It is not only a source of your bread and butter but it also a source of your vision and dreams and therefore you want to immortalize it. It is therefore imperative to organise each aspect of your business in a way that it continues to run efficiently even when you are no longer around. One such aspect it buying a term insurance policy that will act as a tool of making that possible.

Dealing with loss of Employees: Employees are the true foundation of any business but there are always a select few that carve a separate space for themselves due to their hard work and exceptional talent. Such employees become vital for the smooth functioning of an institution. Their skills and knowledge make them irreplaceable. However sometimes one has to let them go or they leave for various reasons. Replacing them is not only difficult but also can prove to be quite expensive as training a new employee takes up resources and time. A term insurance plan makes this process slightly easier as it offers a safety net against the negative effects of losing such precious employees while at the same time helps in replacing them with new and trained individuals.

Low premiums: This feature is of special importance to new business owners. When you have just started a business, resources are scarce. One is pulling money from everywhere to put it in their business, expecting growth in the future and being able to earn much more than they invested. Term insurance comes in especially handy when you don’t have a lot of money to spare. It has premiums lower than any other form of life insurance and still covers the financial needs of your dependents through the death benefit after you are gone.

Flexible: A term insurance policy is far more convenient if one wishes to opt out of it as opposed to any other form of life insurance. In case of a term plan, one can simply stop paying the premium amount and the risk cover will automatically cease, thereby ending the policy. Since these policies come without any savings element, there is no payable amount once the policy ends. On the contrary the life insurance policies that provide a promised survival benefit only give out this amount if the policy is held until its full tenure. Unlike term plans, they are not flexible and one will have to endure financial loss if they stop paying their premiums mid-way. They result tin the loss of the savings made with the policy. Businesses are volatile and anything can happen at any time. In such a circumstance it is better to opt for a plan that is flexible and allows one to opt out of it on the basis of current circumstances.

Renewable: Another great advantage of a term insurance policy is that it is renewable as well as convertible. This means that it is possible to choose a second term without a medical exam once the first term is over. At the same time, term policies are easily convertible and can be replaced with a policy that suits your present requirements more appropriately. For instance, one can convert their term plan into for a permanent life insurance to reap the benefits of its savings element alongside its death benefit. One can even convert it into an endowment plan for exact the same sum assured. There will however be higher premiums.

Protect your business: There is a lot of risk involved in owning a business. So many things can go wrong like a new government policy might put you out of work or increase your taxes significantly. But these unforeseen changes do not have to necessarily jeopardize your life’s hard work. This is where having life insurance becomes important as having a term plan enables your dependents to bounce back from any set back in your absence. The financial struggles can be left behind as the death benefit from your term insurance helps to reposition the business.

Term plans can therefore safeguard your business from any financial liability, loss or even instability in the event of your demise. The money received from the policy can help keep the business operations running smoothly helping your business easily sail through troubled waters.

Protect your family: If you are the family’s bread winner, it becomes all the more important to get a term insurance plan. We all work hard to provide a comfortable life for our family. But what is the point of it all if your family will be ripped off their financial cushion after your death? Along with the emotional loss of your death, they also have to bear a massive financial loss, leaving them penniless. You could certainly lessen their loss by choosing a term insurance plan that will make sure your kids can pursue their dreams and your family can live their life comfortably. Being adequately prepared for unexpected circumstances is the only way to live life!

Helps with debts: Businesses need finances and these finances are often not readily available. As a result, owners of businesses frequently borrow money from various sources. These debts have the potential of crippling your business if they are not paid off in time. A term insurance plan will come in handy to offset these debts after your demise, ensuring the longevity of your business. Your family will not have to deal with mountains of debt after you are gone while managing to deal with the loss of someone they loved.

Relieve you of stress: Planning for these future uncertainties by buying a term insurance plan will ensure that you have peace of mind. Money cannot replace the loss of life, but it most certainly can ease the burden by preventing financial struggles.

In a Nutshell

We all want to be the reason behind our family’s happiness. Your business and your employees are an extension of your family. Therefore, by buying a term plan you can ensure that your family always remembers you as the source of their happiness even when you are not around anymore.