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Your Career

September 14, 2022

Protect Your Small Business, Your Family & Yourself

If you are a key person in your business, and your loss would negatively impact revenue generation, you need a plan in place to cover that lost revenue. Insurance is often the best and most cost-effective solution to bridge the gap until the business can regain its footing.

Imagine this…

You recently founded an early-stage tech start-up with a trusted business partner you met in your MBA program. Your company offers an innovative technology and is doing well. In fact, you and your partner have begun to make a name for yourself in the industry.

After a first round of investments, you’ve been able to grow your team to about 20 people. That said, you know there is a lot of risk associated with this sort of venture. The good news is, you’re both at the stage in your life where you can handle a bit of the unknown.

You and your partner also share a common vision for the future of your business. And your young family is supportive of your ”other baby,” as they like to call it. It seems you’re headed in the right direction.

Then one day, everything changes. Your business partner has been in a fatal snowboarding accident. It’s hard to imagine life without this very important person in it. Not only are you mourning the loss of a friend, you’ve been left to make all the business decisions by yourself. And a lot of debt.

Then your late partner’s spouse calls to tell you they’d like you to sell the business to help pay off personal debt related to getting it off the ground. After speaking with your lawyer, you learn that your late partner’s spouse is now a 50 percent shareholder in the business, and that they have a legal right to make such demands.

You have two choices:

  1. find a large sum of money to buy the spouse out, or
  2. sell the business you put your heart and soul into over the last few years.

Neither option is ideal – and now you wish you had consulted with an insurance advisor to better prepare for this sort of unthinkable situation.

Back to the present

Guess what… time is still on your side when it comes to protecting yourself, your family, and your small business. Below is an overview of the options to consider before scheduling a call with a Serenia Life advisor to discuss what makes the most sense for you.

  1. Individual Life Insurance is coverage that protects your family. Because many small business owners take personal loans, their surviving family members may need to sell the business to cover the loan obligations should the owner die. This results in a distressed sale (i.e., the business is sold for significantly less than its value), which will have negative repercussions on your family. If you and your partner were to purchase an Individual Life Insurance policy with a death benefit (i.e., a payment made to your designated family members or loved one(s) in the event of your death) equal to any debts owed, your families won’t have to worry about paying off your business loans or debts.
  2. A Buy-Sell Agreement is a contractual agreement where, should a business owner die, their share of the business is bought at a predetermined price by the remaining owners through a life insurance payout. This will ensure the deceased owner’s family members are not required to take ownership of a business they may not have the desire or skills to operate.
  3. Key Person Insurance provides the business with cash in the event of your or your partner’s death. As there are many unacknowledged costs that come with losing a crucial member of the business, this lump sum amount could help cover the cost of losing clients, employees, and other critical revenue-earning factors.

Next steps: Let us help

Schedule a FREE Needs Analysis and a Serenia Life advisor will be in touch to can assess your needs and guide you towards the right insurance for your business.

The simple truth is that the right life insurance policy has the power to change the course of the business you helped build and the lives of the people you care about most. Your babies (a.k.a., your business and your actual children) are probably two of the most important things in your life. There’s no question it’s worth it to protect both financially.



This blog post has been adapted from an article originally written by Ryan Hanley for Small Business Trends.

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