Life insurance for business owners

ewlsey · Dec 30, 2016

I'd like to hear from other shop owners about life insurance. I was thinking about getting life insurance. I've never had it.

I asked my dad. He is self employed. He said he doesn't have it and thinks it's a waste of money. His opinion is that if you have sufficient assets (business or personal) that can be liquidated after your death, there is no need for life insurance. I guess that makes sense to me.

What do others think?

jCandlish · Dec 30, 2016

When you buy insurance you are betting against yourself. That is why the insurance business is profitable.

In the aggregate, the insured population is money ahead when the policy holders only buy insurance for which they are legally obligated.

Insurance is like Las Vegas. The house always wins.

moonlight machine · Dec 30, 2016

ewlsey said:
I'd like to hear from other shop owners about life insurance. I was thinking about getting life insurance. I've never had it.

I asked my dad. He is self employed. He said he doesn't have it and thinks it's a waste of money. His opinion is that if you have sufficient assets (business or personal) that can be liquidated after your death, there is no need for life insurance. I guess that makes sense to me.

What do others think?

Term life is pretty cheap now days. Will the wife/kids be able to make it if you are dead? Asset liquidation is fine as long You have cash enough to get through till the sale.

I_AM_MACHINE · Dec 30, 2016

ewlsey said:
I'd like to hear from other shop owners about life insurance. I was thinking about getting life insurance. I've never had it.

I asked my dad. He is self employed. He said he doesn't have it and thinks it's a waste of money. His opinion is that if you have sufficient assets (business or personal) that can be liquidated after your death, there is no need for life insurance. I guess that makes sense to me.

What do others think?

I'm 46 in good health and I pay right at $600 a year for a $500,000 policy. The piece of mind that gives me knowing my wife will have no problems should it take a couple of years to sell my business (and/or to liquidate the assets) is well worth the meager cost.

Just my 2 cents.

Kevin

Flail · Dec 30, 2016

I never had life insurance until I was married and created 2 ankle biters in my forties. Had life insurance until I decided my assets were more than my insurance payout.

alskdjfhg · Dec 30, 2016

I owe a bunch of life insurance right now.

Betting against yourself is a pretty stupid way to put it in my opinion. Our mortality is a certainty, the question is it going to happen at a convenient expected time or not.

Dad was in exceptional health with no risk factors. Didn't matter, had aortic aneurysm and was dead in about 20 hours at 53.

There wasn't a business per-say, but there was a considerable amount of property. There would have been no way to keep any of any of it as the mortgages were way beyond Mom's income. And there is no way that those assets would able to have been liquidated in a fast enough manner to be of any use or get their full value.

Dad's insurance wasn't even all that much, but it was enough to pay off all the mortgages, do some house and car repairs, pay for my college bills, my sister's eventual school bills and let me have a 6400 sq ft shop built and still leave some emergency money.

I'd want to have something to cover atleast end of life medical costs, you don't want to know how much Dad's ER bill is for two, one hour, visits his last day...... That is getting close to stuff lawyers don't want me talking about so I'll leave it at that.

Me being in a position where I really needed that money gives me a biased view, up to you to weight the situation if you die. But I'm certainly going to carry life insurance.

gbent · Dec 30, 2016

ewlsey, its impossible to offer specific advice without knowing more about your situation.

Does your business owe money to a bank or other financier? Do you or your business have sufficient cash to pay off those notes? Do you have a spouse or significant other that will need income? Do you have dependents?

It is typical for a business to hold enough life insurance on its owner to pay off all existing debts. The business owns the policy. In the event of your untimely death this gives your heirs enough time to decide how to proceed with the business. It is not unusual for business notes to have provisions that allow the bank to call the note in the event of a significant business change. The death of an owner certainly qualifies.

SND · Dec 30, 2016

Disability insurance is even more important as far as I'm concerned, but I have both.

CarbideBob · Dec 30, 2016

ewlsey said:
....... His opinion is that if you have sufficient assets (business or personal) that can be liquidated after your death, there is no need for life insurance. I guess that makes sense to me.

What do others think?

Makes sense if the assets are easy to liquidate. I could sell equipment off so value there.
With me gone the wife would have a very hard time selling it so it would probably be by the pound as scrap iron.
Bob

ewlsey · Dec 30, 2016

No debt. I have a wife and will be having a baby in about 6 weeks. My wife works, but I imagine the loss of my income would be a set back until the next guy comes along...

In the case of my dad, I think he was talking more about property/real estate that could be sold.

Monarchist · Dec 30, 2016

ewlsey said:
I'd like to hear from other shop owners about life insurance. I was thinking about getting life insurance. I've never had it.

I asked my dad. He is self employed. He said he doesn't have it and thinks it's a waste of money. His opinion is that if you have sufficient assets (business or personal) that can be liquidated after your death, there is no need for life insurance. I guess that makes sense to me.

What do others think?

Generally agree with your Dad, and have practiced that lifelong. By definition YOU will NEVER be the one as collects it.

Two caveats, though:

For the biz, go and research "Key Man" coverage. Don't have to DIE to be in a position unable to keep it running.

Family: Blanket-sharer needs financial cover. More especially if a child 'might happen', even if - or ESPECIALLY if - you are no longer in the zone by the time zeroeth birthday arrives..

Otherwise , check for A.M. Best top-ratings, buy basic no-frills 'term' life.

One of the larger costs insurers have is sales commissions. Life insurance more than most.

USUALLY, a single, good, "Independent Agent" can package biz, liability, key-man, life - (I'm oblivious to healthcare, but ask him..) - more advantageously than separate providers.

And then.. you take in a one-off job that needs a BIG but temporary boost in coverage? Our ones could do that on a phone call, retroactive to midnight+1, same day, and cheaply so. IIRC, we had ONE million liability all the time, needed TEN million for a week, cost was about $20, and that included furnishing proof to the client.

Bill

72bwhite · Dec 30, 2016

bank what the premiums would be you will be money ahead
it's all just playing the odds

Joe Miranda · Dec 30, 2016

"Blackman on Taxes" in Modern Machine Shop has some really great ideas about passing on one's wealth to his heirs in order to avoid probate and estate taxes. One of the things he recommends is converting massive amounts of one's assets to life insurance later in life because life insurance is not taxable.

Edster · Dec 30, 2016

I have a 500k term policy. It costs $700 a year. I sleep better at night knowing my wife wont have to struggle if I kick it. She can pay a few machine payments while selling things at a comfortable pace instead of calling in the auctioneers the day after the funeral.

Monarchist · Dec 30, 2016

Joe Miranda said:
"Blackman on Taxes" in Modern Machine Shop has some really great ideas about passing on one's wealth to his heirs in order to avoid probate and estate taxes. One of the things he recommends is converting massive amounts of one's assets to life insurance later in life because life insurance is not taxable.

Unless an estate is over $ 5 million, not much of any of it will be taxable.

See also Totten Trusts, AKA "POD". No legal work. EASY feature to add to virtually any bank account, 'In Trust For <beneficiary>" but in no way encumbered as a classical "trust FUND" would be. Still 100% the grantor's money right up until. These do not enter 'probate', either.

...and... the beneficiary has control in-hand just as soon as they can present ID and a Death Certificate.

Life Insurance needs the Death Cert as well, and can take a bit longer to pay out.

Own a home? See to having the ownership arranged so it 'already belongs to' the survivor.

Bill

Jashley73 · Dec 30, 2016

My Dad died at 47 with a mortgage, and several expensive toy payments. His life insurance was enough to wipe out the debt, and ultimately kept us in a house, instead of scrambling to survive.

If you died tomorrow, would you want your pregnant wife to be left with your debt, none of your income, and being responsible to keep herself afloat as she's facing child birth, then maternity leave as she begins raising an infant, while grieving you, without your support, and then being forced to liquidate your assets, so that she can survive?

If you answer "Yes" to that, you are one of the most selfish persons I've ever met, and don't deserve the loving support of a family.

Skip a happy-meal once a week, and buy a term life policy. They are not expensive, and the small sum will make a big difference for your family, should they ever have to collect. This is not about "betting against yourself," it's about providing for your loved ones in their darkest hour. Due your due diligence as a husband & father, and make sure they'll be provided for...

----- ----- ----- ----- -----

Plus, I'm betting this will "click" once your new child is born, and you hold them for the 3rd time. (It takes a little bit to sink in...)

Here's a freebie - When they're born, cover their little butt in vaseline. They micomial stool is like tar, and it'll wipe right off with the Vaseline. Otherwise, get ready for a rude first diaper change! You've been warned!

God Bless though. Parenting is great, and I bet you're gonna love it. Just buy that life insurance!

Monarchist · Dec 30, 2016

Jashley73 said:
Skip a happy-meal once a week, and buy a term life policy. This is not about "betting against yourself" It's about providing for your loved ones in their darkest hour. Due your due diligence as a husband has father, and make sure they'll be provided for...

Uhhmm.. easy, J.

Looks to me like Wes IS doing exactly that.

He didn't come in this door asking about buying a bass boat.

jCandlish · Dec 31, 2016

alskdjfhg said:
Betting against yourself is a pretty stupid way to put it in my opinion.

It is not a analogy.

Each time you pay for insurance you are placing a bet that you will get to collect. The insurance company is the bookmaker that sets the odds that make sure that "in the aggregate" policy holders lose.

In general, the only time to buy insurance is when you are legally obligated to do so.

gbent · Dec 31, 2016

Cemeteries have lots of occupants who weren't planning to be there. Life insurance is the most common method to feed your children after you leave this mortal realm.

While we are on the subject, you should also look into putting your assets into a revocable trust. If you die, your assets don't automatically belong to your wife or other heirs. Your assets belong to your estate until such time the court decides to transfer the title to your wife. A revocable trust does nothing to change how you operate your assets while you are alive. A trust is essentially you, incorporated. Corporations don't die until the owners kill them. A trust is the same way. The revocable trust can be changed as many times and however frequently you desire or your changing situations dictates. It only becomes irrevocable at your death, and can also be set up to take over in the event of disability.

Property inside a trust does not go through probate. Probate is a public document. Probate will often enrich lawyers by 10-20% of the total estate value.

Jashley73 · Dec 31, 2016

Monarchist said:
Uhhmm.. easy, J.

Looks to me like Wes IS doing exactly that.

He didn't come in this door asking about buying a bass boat.

Not really throwing any stones. Just pointing out, that the cost is relatively small, and certainly affordable. I certainly don't think he's a Dummy.

Life insurance for business owners

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