Whole Life Insurance Cash Value for Business
A business life insurance policy is a beneficial thing for businesses of all sizes. Though it’s beneficial, there are still a lot of business owners out there that are hesitant to add one to their current financial net, missing out on all the key benefits that come along with it.
There are lots of things that owners can break free from, using it as a way to secure the future and clear up current mishaps caused by debts and other key challenges in the business world.
What Is Whole Life Insurance?
Whole life insurance is a life insurance option that covers the policyholder for the duration of their life. One key part of whole life insurance is covering premiums, something that has to be paid on time. It’s common insurance, though many business owners don’t usually think of it as a benefit to them.
Not only does it offer options to secure their family but also their business, even coming with options to take out loans thanks to the cash value option.
A Look at Cash Value with Life Insurance
One large benefit that can come from whole life insurance as a business owner is a cash option feature that acts like an investment. Investing is a solid option when using life insurance as a business owner of all kinds, though they have to deal with one thing, taxes.
Cash value options come with the opportunity to withdraw from the overall value of the policyholder’s life insurance, which can be used to improve business, pay down, loans, or take care of the unexpected.
Loan Against your Policy
Because you have to pay premiums throughout the extend of your life insurance, does not matter weather it’s term life, universal life, or whole life insurance, the value could add up quickly. This is part of the reason why you’re able to take out loans, as you’re essentially borrowing from your own money.
Keep in mind that taking out a loan does deduct from the value of the death benefit that’s worked into the life insurance policy that protects your business loan, though that’s something that can be replenished at a later date.
Accessing Cash Value Investments
To access and use the cash value of your whole life policy that you have accumulated over time, there are a few ways that you can do so. Before doing so, you should take some time to think about what you would like to use it for.
As a small business owner, loans should be saved until there is a true emergency or if there is an opportunity to expand that wasn’t there before. A few ways to get access to cash value with your whole life insurance are listed below.
Partial Withdrawal
With a partial withdrawal, policyholders can access an amount that’s within their cash value. When life insurance policyholders decide to do that, it takes the amount out of the death benefit and keeps the rest of the funds invested. That means that the value will continue to grow, and business owners can use that toward anything that they need to keep the business running smoothly.
Pros
- You will not have to pay interest on a withdrawal from your account
- There is no loan application and no credit approvals needed
Cons
- Reduction of the death benefit, which could prove detrimental in the future
- Higher interest than some other loan options
Retirement Income
A popular option among many whole life insurance policyholders is to use it for a supplemental income to their retirement income. That means that, over time, they have the chance to build up the value of their cash option and can use it later to add funds monthly or bi-weekly to their payout.
Accessing the cash options for means of a retirement supplement is one way that business owners can secure their future and their loved one’s futures as well while making sure that their business can keep on running and they can keep on living well after retirement.
Pros
- Supplement retirement income with small withdrawals each month
- Keep a nest egg just in case anything happens with the business
Cons
- Reduces the death benefit
- Takes away funds that could be used by loved ones and business partners in the event of a sudden death
Full Surrender
Though it’s not recommended unless necessary, there is an option to access the cash value within the life insurance policy with full surrender. What this will do is pay out the cash value of the entire policy, eliminating the policy altogether. This is not free of fees and may wind up with a value much less than if policyholders choose partial withdrawal.
Pros
- Could result in a large amount of cash in hand
- Useful for business expenses and/or expansion
- Could be used to invest in a more profitable account
Cons
- Could result in high taxes that policyholders will have to pay back at the end of the year
- Zero benefits for beneficiaries
- No cash value in some cases due to fees and other charges for surrender
Deciding Your Best Option
As a business owner, you have a lot more to think about than just yourself. You have to think about your business, employees, and also your family. That puts a lot of pressure on you, as any unforeseen circumstances could mean trouble for those that you love and care for.
It’s because of that that you should consider a life insurance policy, though you should weigh your options to find the best one that fits your current and future financial goals.
To get a glimpse of how you can start building a cash option and securing your assets with help from a cash option, give Sim a call. Her knowledge of both insurance policies and investments can help you find the perfect policy that fits your unique situation.
There are a lot of benefits that come along with life insurance policy, especially as a small business owner. Find out how you can benefit and start securing your financial future today for a better and more secure tomorrow.
Essential Planning for Financial Security
Helping business owners and self-employed professionals grow retained earnings tax-free, pass more wealth to the next generation, and protect their biggest asset – themselves, the executive of the business by acquiring a key person life insurance policy.
Other FAQs Regarding Life Insurance as a Business Owner
- How Does Life Insurance Policy Work for Business Partners?
- How can I Protect a Business Loan with Life Insurance?
- What Are Some Myths Business Owners Believe About Life Insurance?
- How Can I Protect My Employees With Life Insurance?
- What Are The Benefits of Life Insurance For My Business?
- How Much Does Life Insurance Cost for Small Business Owners?
- Why Should I Choose Term Life Insurance As a Business Owner?
- Can My Business Pay for My Life Insurance?
- What Are My Life Insurance Needs As a Business Owner?
- A a Business Owner, Why Should I Select Whole Life Insurance?
- How Does Key Person Life Insurance Work?
- Is Life Insurance Taxable in Canada For Small Businesses?
- How can Life Insurance can Help Me as a Small Business Owner?
- How can Whole Life Insurance Help my Small Business?
- How can my Business Benefit from a Universal Life Insurance Policy?
- Why is Life Insurance Important as a Business Owner?
- What Types of Life Insurance is Available to Me as a Business Owner?
- Can I Purchase a Group Life Insurance Policy for My Company?
- Are There Any Strategies That I Should Follow When Purchase Life Insurance for My Business?
- What are The Best Life Insurance Products Available to Business Owners?
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