Having a Family Business? Here's Why you Need Term Insurance
New Delhi : Individuals running their family business continuously face decisions about finances. While, some face decisions about expanding or finding the most appropriate source of funding, others constantly think about managing their cash flow.
When making financial decisions, buying term insurance should be on top of the list for business owners. Unfortunately, the need to have term insurance is rarely a priority for many. Individuals who run their family business do not believe in the value of having a term policy. However, the question to ask here is “Why is term insurance so important?”
Well, it’s crucial because regardless of how much income your business generates today, you are not sure what lies in the store for you tomorrow. In such a case, you need a financial safety net that can help take care of unavoidable financial situations even in your absence. A ‘Term Policy’ perfectly fits the puzzle here.
Following are some reasons which will make you realise the true worth of a term policy for the future of your business and family:
1. Providing Financial Stability to Your Dependents
Being the head of the family, your most important duty is to keep your loved ones safe irrespective of what troubles come in your business and life. Term insurance will act as your saviour and help to pay any debts, replace lost income, pay for children education expenses and ensure that your dear ones get the much-needed financial security.
For instance, consider a 35-year old businessman- Gautam – who opts for a term policy worth Rs. 1 crore to provide financial stability to his family. If he were to pass away suddenly during the policy period, his family would receive Rs.1 crore. This amount will make up for the loss of income and provide financial support to Gautam’s family in his absence.
2. Taking Care of Your Business Liabilities
No matter what tragedy happens, one sad reality of life is that our loans are never excused- be it personal loans or business loans. If you were to pass away suddenly, leaving behind the burden of your business loan on your family members, think of the financial stress it will cause them. One way to reduce the dire financial stress is to have a term policy that can take care of your business loans in your absence.
Continuing with our earlier example, consider a situation where Gautam meets with an unfortunate accident and passes away. Later his family finds out about his business loan worth Rs. 25 lakhs. They can repay this business debt from proceeds received from term policy. Even after paying the loan, the family will be left with Rs. 75 lakhs (1 crore – 25 lakhs) which they can utilise for their other financial needs.
3. Building Back the Family’s Business
If a catastrophic event of your demise does occur, your business operations will likely to be interrupted in your absence. And during this time, your business may suffer from loss of income, until someone replaces you and retakes control of the operations.
It’s true that you can’t expect your family members to replace you right away as it will take time and a strong financial backing to build back the business again. However, term insurance can help you in this regard by providing your business with the much-needed financial support.
Going back to our example, if any of Gautam’s family member wishes to continue the business, they will still have Rs. 75 lakhs. They can utilise a certain portion of this amount to re-start the business and make it grow again.
4. Taking Care of Your Family’s Future Goals
Term insurance is a financial product that takes care of your family’s future goals even in your absence. This is possible because the lump sum payout helps achieve key milestones in the life of your dependents as it provides for your children’s higher education, their marriage or even funds their start-up.
Today, insurers like Future Generali offer various options to receive the lump sum amount. The options are as below:
• Entire payment as a lump sum
• Part lump sum and rest as monthly income
• Increasing monthly income
The monthly income option makes sure that your spouse does not have to struggle to keep up with day-to-day household expenses in your absence.
Concluding, Last but not the least, there is nothing that can substitute the peace of mind of having a term policy. While death is unavoidable, you will at least know that the future of your business and loved ones is secure with term insurance.