Time to Review Your Personal and Business Financial Risks
This article originally appeared here.
In March 2020, the world changed when COVID-19 shut everything down. Since then, there have been stay-at-home orders, remote work, and schools and universities teaching over Zoom. The economy is a paradox — staffing shortages, high unemployment, supply chain problems, and business closures for some; or the best sales results in decades for others, along with a stock market that continues to grow. In the meantime, company expenses have increased to adjust to the impact of the pandemic.
The life insurance industry has also been impacted. The number of death claims has grown by double digits. But the positive is new life insurance sales are growing for ages that were slow to purchase coverage in the past. Perhaps the pandemic has shown a light on the financial risks that weren’t as apparent or were brushed off in the past. Have you considered your personal and business financial risks?
Personal Coverage – In the event of your death, a benefit to your spouse or children can help cover the loss of income, final expenses, debt, and help provide an educational benefit. If you already have personal coverage, it is important to review the death benefit amount periodically to make sure it will continue to provide desired coverage for any increasing income and higher expenses. And in a low interest environment, will a death benefit earn enough for lifetime access to the funds, or will the beneficiary run out of money too soon? Consider increasing your coverage to manage a gap in your personal financial plan. If your spouse doesn’t have an income, it is still important to purchase coverage on your spouse to cover the expense for child care, final expenses, and debts.
Business Coverage – When competition for qualified employees is fierce, life insurance can also be used to offer a more immediate award for remaining with the company by using a bonus structure that encourages key employees to stick around for the long-term. To help protect your business from the sudden loss of a key employee (including yourself) due to death, key person coverage provides the business with cash at a time when it may be needed most to help find, recruit, and train someone new; and to help replace lost profits due to the loss of the key employee and their skills and leadership.
Did a business in your community risk its future when a business owner died suddenly? It is essential to have a written business succession plan to help manage the transition to a new owner. Yet, even the best succession plan can be derailed if the money to implement a buy-sell agreement is not there when it’s needed. Life insurance proceeds are promptly available after the death of the insured owner to help cover the purchase price for the owner’s share of the business, helping to ensure that the new or remaining owners can keep the doors open.
Every industry has experienced unprecedented change over the last two years. What hasn’t changed is the need to manage the risk. Take some time to review your personal and business financial risks and consider updating your coverage.
This article is for general information and risk prevention only and should not be considered another other offer of insurance or legal, financial, tax, or other expert advice. The recommendations herein may help reduce, but are not guaranteed to eliminate, any or all losses. The information herein may be subject to, and is not a substitute for, any laws or regulations that may apply. This information is current as of its publication date and is subject to change. Some of the services referenced herein are provided by third parties wholly independent of Federated. Federated provides access to these services with the understanding that neither Federated nor its employees provide legal or other expert advice. All products and services not available in all states. Qualified counsel should be sought with questions specific to your circumstances. All rights reserved.
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