LIFE INSURANCE CAN BENEFIT YOUR BUSINESS

The high costs of insurance can sometimes dissuade business owners from subscribing to it. However, it is important to consider the various benefits insurance can afford a business owner before deciding on its worthiness. Below, we have outlined four insurance strategies that should be considered by business owners before undertaking any decision.


Shareholder Buy-outs


The success of a partnership often relies on the collaborative and cohesive efforts of the partners. Consequently, the death or the physical or mental impairment of one of the partners can have ruinous effects on the business. Insurance can provide an attractive method of funding a buyout agreement to ensure the business survives in the remaining partner's hand. The insurance would allow the beneficiary (the remaining partner) to have sufficient funds to compensate the surviving family properly and fully control the company. Thus, ensuring the business continues to thrive.


Shared ownership


This strategy is ideal for corporations as it provides incentives to key employees to remain with the corporation. Under this strategy, the corporation and key employees alike would pay the insurance premiums. The benefit for the corporation is that they are the beneficiary of the insurance. As for the employee, his benefit derives from the guaranteed return of premium. This strategy affords protection to the corporation and motivation to the employee to remain with the company.


Minimize corporate taxes

In the case of a corporation choosing to invest its assets in fixed income, it can use insurance to reduce its taxable income. Additionally, this will reduce the value of the company by the correlative value of the investment, thus reducing capital gains tax.


Maximize corporate assets

Universal or whole life insurance can afford the policyholder a way of earning tax-deferred growth on his corporate assets. As a result, corporate assets may circumvent accrual taxation and grow exponentially more than if they were placed in a regular account. Furthermore, at death, proceeds can be paid tax-free instead of a taxable dividend. Without using this investment strategy, the proceeds would be paid as a taxable dividend, meaning that up to one-third of the proceeds to be owned in taxes.

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