An entrepreneur’s optimism is a key factor in her success. And yet, that same optimism can sometimes lead business owners to gloss over the troubling “What if…?” questions.

Despite our attempts to control our destiny, life happens. The difference between a successful, long term business owner and financial ruin may just come down to having a financial safety net in place.

In this two part blog series, I’ll discuss three ideas to build your safety net.

Protect your family and business with life insurance

Life Insurance is put in place first and foremost to protect those you care about. If you pass away, what do you want to happen with your business? If you are a sole proprietor, you may be fine with the business closure, in which case, you need to only establish the financial value of your future earnings and have a policy to reflect that.

If you are incorporated, you may want a business partner or successor to take over. However, your business shares may transfer to your spouse or children. Do you want them to run the business? Do they want to?
Business owners may therefore set up a criss cross agreement, whereby some or all of the life insurance money goes to a business partner who then buys the shares from the deceased partner’s spouse at a predetermined price.

If you have a key person in your business then you may want to have a key person life insurance policy on them, so that the business can back fill their role with the two or three people and time it takes to replace them!
Finally, life insurance isn’t only about your business legacy. A permanent policy may be structured to decrease your corporate taxes and increase your cash flow in retirement and benefit you while you are alive!

Stay tuned for Part 2 of this blog where I discuss Disability Insurance, Critical Illness insurance and Business Overhead Insurance.

Alison Setton

Alison Setton is an insurance and investment brokerage owner and teaches financial literacy at WealthWave, the How Money Works (TM) company in Vancouver, British Columbia. She began her career as an Environmental Engineer and pursued an MBA in order to further the projects she was passionate about. After working in roles as an Engineer, in community relations, project management and consulting, she made the leap to being an entrepreneur in the financial industry in 2012. This incredible leap, as every business owner knows, has provided the greatest education of all, and more importantly, allowed her to create the freedom of time that she and her family desired and deserved.

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