Life insurance can be a valuable part of your business plans.
We recognize and anticipate changes in the economy, but the uncertainty of those changes requires us to be vigilant in our business continuity plans. The ability to recover quickly after an unexpected event starts with creating a policy tailored to the circumstances surrounding your business. An annual policy review is an easy way to review your coverage and identify needs.
Life insurance has long been valuable in the business market, and permanent policies can be more beneficial in uncertain times:
- Guaranteed cash values can help buffer against economic shocks, keeping a company afloat in a crisis.
- The policy loan is not dependent on credit history, and repayment can be arranged on favorable terms.
- Death benefits from a key employee policy can be used to buy that person’s stake in the company, ensuring stability for the business.
Over the past few years, the effects of COVID-19 have dramatically changed the business landscape. Companies with high demand for products such as personal protective equipment, hand sanitizers and masks have seen their profits and net worth increase while others such as restaurants have struggled. Death benefits from life insurance are more important than ever in planning for business succession in the event of the untimely death of an owner or key employee.
Here are two steps you can take when reviewing your coverage:
- Look for and analyze any significant changes since the last review.
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- Business valuations vary, primarily for businesses in which valuations may include multiple earnings. If the earnings are dramatically higher, more insurance may be needed so that the surviving business owners can purchase the deceased’s interest.
- Change in ownership percentage for any owners. These updates may require realignment of coverage. Recent mergers or acquisitions may also require additional insurance or transfer of existing insurance.
- A change in any owner’s family situation, including divorce, death, disability or medical conditions. This includes circumstances affecting both the owner and his family members.
- Changes in key personnel, such as employees leaving or retiring. Should an incentive program be designed to attract or retain key employees?
- Ask about current life insurance coverage:
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- Are current policies working as expected? Low credit interest rates, reduction in dividend schedule or change in guaranteed insurance charges can put the policy at risk, especially universal life coverage.
- Are the policies borrowed against?
- Is the beneficiary designation still accurate and correct?
- For employer-owned life insurance, does the employer attach annual Form 8925 to its income tax return so that the death proceeds are not taxable income?
This review can be done over the phone, so it is possible to complete it even when face-to-face meetings are not possible. Don’t hesitate to contact your life insurance agent for a review of your business life insurance portfolio; You can help ensure your business is adequately protected.
Neither Cincinnati Life Insurance Company nor its affiliates or representatives provide tax or legal advice. Consult with your tax advisor or attorney about your specific situation. For policy service and additional information, talk to represents an independent agent Cincinnati Life Insurance Company. For a complete statement of coverage and exclusions, please see the policy agreement. All applicants are subject to underwriting approval. Products and riders are available in most states.