Life insurance is crucial, especially if you have a business partner who relies on you, or if your home business is the main source of income for your family. Life insurance will help ensure that your family has the money it needs should you meet an untimely death. Some lenders require that you have life insurance before they will issue a loan; this guarantees that the loan will be repaid if you meet with an untimely end.
Key person insurance is a form of life insurance that might be suitable for some home-based businesses. Key person insurance pays out when the owner of the business or a crucial employee dies. As the policy owner, the company is the beneficiary and receives the proceeds when the insured key employee dies. The payout can help the company by providing:
- cash to weather the loss and continue operations until a new employee can be hired and trained to carry out the functions.
- the funding to buy out the key person's heirs, if ownership rights of the business are involved.