Many high net worth business owners may not realize the importance of retirement planning. As Insurance News Net pointed out, these consumers are exceptionally busy running a successful business, and many view retirement planning as a secondary concern.
Unfortunately for these consumers, successful retirement planning begins early in life, so a wait-and-see approach is likely to cause problems. Financial professionals need to address this issue directly with clients who own businesses, and should present options that allow business owners to incorporate their retirement planning strategy into their business plan. Life insurance is the ideal product for this scenario, and financial professionals should make business owners aware of how these products can safeguard their businesses and families against loss while improving the owner’s financial standing in retirement.
Different ways to use life insurance
Key person insurance is a classic example of life insurance in the workplace. This type of policy safeguards a company against the expense and confusion that results from the death of a critical person within the organization. Financial professionals should proactively review the arrangements of their business-owning clients and confirm that their company is properly protected.
Buy-sell insurance is another often over looked business priority, but shouldn’t be, as it is the center of any business continuation plan. A well drafted and funded buy-sell agreement is designed to protect and preserve the business if one partner were to pass away. In many cases, the business owners often have no coverage or have a drastically underfunded buy/ sell agreement. This type of advanced planning can also solve several estate planning problems for the family.
Many business owners face a tricky problem with estate planning because they want to give their company to a single child while providing their other children with a similarly valued inheritance. That can be difficult without a life insurance policy that pays out on the business owner’s death. With an insurance policy that names specific children as beneficiaries, the business owner can ensure that children who do not receive full or partial ownership of the company still receive benefits that are of equal worth.
More than anything, the needs of a business owner highlight the value of consistent and in-depth policy reviews from financial professionals. A business owner’s specific insurance needs and financial situation may change rapidly, and financial professionals can identify the types of insurance products that are most suited for a particular fiscal situation and need. By working closely with a trusted financial professional, business owners can improve their own retirement plan while enhancing the financial security of their business.
High net worth business owners may not understand the need for life insurance as part of a larger business strategy. Financial professionals can direct these clients to the best options for their needs.