Why Do I Need a Business Continuity Policy?

 

Every company, large or small, needs a business continuation plan, which answers the question of what will happen to your business if you die. Individual life insurance can be a key component of your business continuation plan. Your business associates, your family, and your heirs can all benefit from this form of long-term protection.

 

The following are common characteristics of closely held businesses that make business continuation protection essential:

 

• Often times small businesses depend on borrowed money, which is usually secured by personal assets. Without a plan, your business might have to be sold off quickly, in the event of your death, in order to pay down outstanding debt.
   

• Many closely held businesses lack successor management. If a chosen successor isn't there to open the doors, stock the shelves, and direct operations, the business may fail.
   

• Finding a buyer and getting a fair price for the business may be difficult, especially following the owner's disability or death. Unlike publicly traded companies, a steady marketplace for buyers and sellers of closely-held businesses doesn't usually exist.
   

• Finally, if you do not hold a majority or controlling interest, you or your heirs should expect a reduction in your anticipated sales price. Buyers are often unwilling to pay fair market value for a minority interest that lacks management control.