Business use of Life Insurance

Business use of Life Insurance..

1. Effect on business. If the sole proprietor has insured himseff for a big amount and he dies before the attainment of specified age in the contract, the beneficiaries can operate the business on receiving the claim from the insurance company. The business in thus not closed.
2 Availability of credit. The sole proprietor can obtain loan for meeting the operating cost of-a business against the life insurance policy.
Staying power. If the beneficiary is not able to run the business on thepremature death of insured, he can at least stay in the business for a short periodand sell the business in the running condition which certainly fetches a betterprice.
Shock absorber. The death of a sole proprietor completely upsets thebusiness. The payment of claim by the insurance company acts as a shockabsorber and promotes financial security for operating the business.
Payment of debts. If the sole proprietor is insured, the creditors haveinsurable interest in him They can receive the amount of loan on the settlementof claim on the sudden death of the proprietor
6- Financial strength. The periodic payments by the policy holder accumulates large saving which provides financial strength to the sole proprietor
Partnership insurance. In a business partnership, if the partners haveobtained a joint life policy, the surviving partner is not financially affected. He canpurchase the interest of the deceased partner.
Benefit to stock holders. The stock holders in a close corporation may
also have a joint life policy and thus ensure the availability of funds for the business.
9. Insurance of key executive. The life insurance companies also providethe benefit of insuring the key executive of the firm. If the key executive diesbefore the specified age, the firm is compensated of the loss as caused in the
disruption of the company.
10. Group Life Insurance. The firm can provide an added benefit to its employees by giving them a group life insurance policy. In the group insurance, the maximum limit of payment on the death of an employee is fixed by the insurance company. The employees, thus, also benefit from the life insurance
companies.