As a business owner, one of the best pieces of advice you can give employees is to make sure they have life insurance. In the event of a tragedy or illness, it means that their loved ones will be provided for and some of the financial burden will ease.
There are two main types of cover within this field – here’s an explainer as to how they work.
Term Life Insurance
This is a form of insurance that’s considered to be a more affordable option than that of permanent life insurance. It’s a great option to consider if you want coverage that will last for a set number of years and will pay out at the end of the term.
This is dependent on several factors. Firstly, your policy must not have expired and secondly, all premiums must be paid up. It’s an especially good option to take as you can lock in a rate for the entire period of the term. This makes longer-term financial planning and budgeting much simpler.
A plan like this is ideal to invest in alongside a work-related policy, such as Directors Life Insurance if you’re the owner of a company or hold a significant share in a business. It can give peace of mind to your loved ones and also ensure that if you’re part of a business, the company and employees won’t suffer in the event of an accident or life-limiting illness.
When a Term policy ends it can sometimes be renewed at an adjusted rate. However, this can only be done on a yearly basis, and you won’t be able to take out another term period. Any new rates will factor in age and health and sometimes a medical exam is needed to gain coverage.
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Permanent or Whole Life Insurance
This is, as the name suggests, a coverage policy that runs for your entire lifetime. It will pay out benefits whenever you pass away, as long as the bill has been paid and all premiums are kept up to date.
This form of insurance sometimes has a savings component, of which a small portion of your premium is paid into. This has a fixed interest rate and this means there can sometimes be a substantial cash value over time. For this reason, a permanent life insurance policy is often a lot more expensive than a term policy, but it does offer more long-term benefits.
However much your policy is worth in cash terms, this won’t affect the death benefit, which is obtained by benefactors when you pass away. The one exception to this is as follows: if the cash invested equals the same amount as your death benefit, your insurer will almost always end the policy and pay out the entire coverage amount. As a side note, this only usually happens if you live to or beyond 100!
You can always withdraw some of the money as a life insurance loan if this worries you. For this, there’s no need for any credit check. The loan would need to be repaid with interest or if you die before the funds are paid back.
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