For small-business owners, life insurance can offer many benefits, such as the typical motivator for any potential policyholder: providing the family with enough money if the primary earner dies.
Just because one owns a business doesn’t mean it’s worth a lot of money at any given moment. Even if it is, that value often isn’t very liquid and can be realized only by selling the business. Therefore, the surviving family members would be left relying exclusively on the cash flow the business produces.
Another important reason a business owner may purchase life insurance is to provide liquidity with which to pay estate taxes when the policyholder dies. The estate tax is due in cash nine months after death. A family could be in a position of needing to use most or all available cash, borrow from a bank or quickly sell a company under duress. Life insurance is very frequently utilized to avoid these pressure…
