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In This Article, I’ll Discuss In Specific Detail Why People Buy Life Insurance To Cover Business Loans
You intend to apply for a business loan, either through the bank or through a small business association. They have informed you that it’s necessary for you to purchase life insurance to cover for a new or existing business loan.
You’re trying to demystify that risk. What happens to your survivors and your business if you pass away before the loan is paid off?
I’ll cover what factors to consider and what types of options are available. With this information, you can make an informed decision about which type of life insurance would best cover your business loan.
Today’s Topic Overview:
- Factors To Consider When Buying Life Insurance To Cover A Business Loan
- Stories From The Field
- Beneficiary Wording
- Health Factors
- The Length of the Loan
- Types of Life Insurance for Business Loans
- Term Life Insurance Coverage
- Annual Renewable Term
- Top 7 Reasons People Buy Term Insurance
- Case Study Examples
- Why Work with a Broker?
- Next Steps
Factors to consider when buying life insurance to cover a business loan
The factors to consider are different from those that you would consider when purchasing life insurance on a personal basis.
Many people (including business owners) purchase life insurance coverage for personal reasons. They want to cover things such as replacing their income. They want to pay off mortgages and fund estate planning. The nature of business loans is different from that of personal loans.
Let’s talk about the factors to consider.
Most likely you’re looking at a business loan that has a multi-year payoff with a principal and interest component to it. It’s important that you word your beneficiary statement correctly.
You don’t want the payout from any life insurance proceeds to be the entirety of the balance. You want your beneficiary wording to state that the principal plus interest is due. You want no more than that.
You do not want to overpay the bank from any sort of proceeds that you have from the death benefit payout. You only want what’s required to pay off the loan. Then the bank or small business association has nothing to worry about as far as its loan being covered goes. You can leave any leftover proceeds to your family.
Make sure that you work with a specialist like us here at BuyLifeInsuranceForBurial.com. We can tell you how to set up the wording specifically so it’s done correctly.
Our job at Buy Life Insurance for Burial is to find the most affordable and high quality coverage possible for our clients. If you would like to know what you might qualify for, give us a call at (888) 626-0439. You can also send a request using the contact us box found on this page. We would be happy to answer any questions you might have and you will be under no obligation to buy from us.
Health factors make an impact on the availability of insurance coverage to you. As with all life insurance products, all the normal health questions will be asked.
- What’s your age?
- Do you smoke?
- Do you have any lung or heart history issues?
- Do you have neurological problems like lupus or multiple sclerosis? Do you have any mental health diseases?
- Do you take prescription medication?
- Have you been to a doctor?
- Have you been hospitalized within the past five years?
And so forth. These health factors will have some sort of bearing on your eligibility for life insurance coverage. Take no concern if you do have some sort of insurance.
With health issues, even if it’s just a few medications for blood pressure or cholesterol, there’s one key factor that you need to consider. When looking for life insurance to cover a business loan, make sure that you work with a business broker. Here at BuyLifeInsuranceForBurial.com, we shop for the most competitive carriers. We have the goal of getting you the best value of price and the best value of coverage.
Some companies take on a tougher stance against some elements while others are more accepting. We know these carriers. We can find this information out for you. We can do this much better than you could on your own or if you only work with one company that offers limited choices. If you have any health factors, or even if you’re in perfect shape, work with a broker to give you the best chance for the best value overall.
The length of the loan
The nature of the loan decrees that it’s very likely that its length will be 10 years or less. Most likely you’ll be looking at shorter term life insurance options. They will cover you just for the period of the loan.
Say that you would prefer to keep the life insurance for other reasons than business loan identification. You can consider a life insurance plan for a longer term or for more coverage. You can change the beneficiary wording later.
This, however, is not necessary when satisfying the requirements for covering the bank’s investment in you via the loan. Either way, your life insurance agent can customize your program. He can satisfy all of your personal and business related goals within that life insurance policy.
Stories from the field
My intention in sharing stories from the field is to convey the importance of getting quality life insurance in place. Often I see individuals who have been taken advantage of or are misinformated and end up with subpar coverage that doesn’t meet their needs.
This particular story is about an older gentlemand named Mr. Jones. He was a retired school teacher and veteran who was 85 years old when I met him. He had recently gotten remarried and though he already had life insurance, he wanted to add to his coverage to ensure his wife and kids would have money when he died.
Mr. Jones had unfortunately suffered from a number of strokes and was taking blood thinners to ensure his continued health. He was aware this could affect his life insurance premium and was concerned about the cost of adding extra coverage.
After doing a health analysis with him I determined that we were able to qualify him for several different life insurance plans at preferred rates. This was especially important in Mr. Jone’s situation because he was aware there were life insurance companies out there who claimed to offer quality coverage but did not offer first day coverage.
At his age, Mr. Jones knew that first day coverage was incredibly important. Not being in the best of health, he knew the two year wait period many insurance companies required could still be in effect when he could pass away, which would mean no payout.
Needless to say, it was only six months later that I got word that Mr. Jones had passed away. While I was saddened by this news. I was also so thankful that we had gotten him first day coverage.
We were able to provide a death claim payout to his wife and kids – something that meant a lot to them in the midst of their loss. This experience was an important reminder to me that I try to pass on to my clients. Working with a broker like us at Buy Life Insurance for Burial means you get the best chance at getting first day, affordable coverage.
We have access to a number of providers, which allows us to find the best quality coverage available given your particular application details.
We don’t want to see is our clients settling for inferior coverage. That’s why I share this story. You deserve to get the best quality coverage possible at a price you can afford.
Types of life insurance options for business loans
What types of life insurance programs are available to you? Here are some options that you can consider. This will help you to determine what kind of life insurance is most appropriate for your indemnification needs.
Term Life Insurance Coverage
Term insurance coverage is the most popular form of life insurance for business and personal loan indemnifications. It’s the most common choice among business owners to satisfy the requirements of the bank.
The reason for this is that term insurance is simply pure insurance. There are typically no dividends paid or cash value generated in term life insurance. It’s a contractual promise.
A specific benefit will be paid to your beneficiary upon your passing if it occurs within the lifetime of the life insurance product. With term insurance, you can customize the length of time of the plan from 10 years all the way up to 30 years.
Considering that most loans are 10 years or less in length, it’s very likely that a 10-year term is going to make a lot more sense to purchase. Term life insurance also offers a level price of premiums. They do not go up during the length of the term.
Term insurance returns your premiums. It’s designed to return the premiums you paid after a period of time. Essentially you get your money back on your premiums if you pay for the length of time of the plan.
The problem with return of premium type plans is that you pay for the additional rider. Most businesses would do better to have that money put into their business. Or you could put it into a private investment account. It will retain dividends and have an exponential growth.
The marketplace grows. Inflation has an effect on your refund. Refunding the money that you paid in ten years ago now has a deflated value. Getting your money back in your life is not a bad idea. But you can put your money to a better use than getting a simple refund after 10 years.
If this is how you think, then you may want to consider a cheaper form of insurance, take the difference and put it into a growth-oriented investment program. Or reinvest it back into your business!
If you like what you have read so far and are curious about your own monthly rates might be, give us a call for a free quote at (888) 626-0439. You’ll speak to an expert in the field who can explain what your options and rates might look like before you even begin the application process.
Top 7 reasons people buy term insurance
1.Term insurance is affordable
If you’ve invested a lot of money into getting your business up and running and find that you need to take out a bank loan to expand, the bank may require some sort of life insurance coverage. The good news is term insurance is very affordable compared to other types of life insurance.
If the primary reason you want to get life insurance is to cover your income, term insurance works well to meet this goal. Term insurance can safeguard your loved ones, providing a lump sum payout if you pass away sooner than expected that can be used for financial obligations.
One of the great things you can do with a term life insurance plan is fund your retirement. If you pass away sooner than expected, your contributions to a 401K plan stop. With retirement funding you can ensure your loved ones can benefit from a retirement plan long after you are gone.
4.Out of love
Love is a big motivating factor for those who are seeking life insurance. You can have peace of mind in knowing your loved ones will be taken care of and relieve the financial burden they may otherwise experience.
You can customize the length of time your term insurance lasts, making it a very flexible option.
6.Pure insurance need
Term insurance serves one purpose, to pay a death benefit to your beneficiary upon your death. It meets the needs of those who simply want to ensure a death payout, without any of the complicated and sometimes costly extras added on to the plan.
7.Exams are optional
Exams used to be required for any life insurance application, but that is no longer the case. If you are looking to get term insurance, you have the option to go with a non-medical application if you would prefer to skip the doctor visit and other exam procedures.
Case study examples
Ten Year Bank Loan
A young man recently sent us a message to say that he was looking for a 10 year term life insurance plan. He owned a small business that was starting to do well and he wanted to expand his reach by getting a small bank loan.
In order to get the loan the bank had requested that he get a term life insurance policy for the life of the loan. He came to us with the confession that though he was eager to get life insurance, he was very concerned about the rates due to his health condition.
He went on to explain that he had diabetes and had to take insulin regularly to manage his blood sugar. He had heard that this could cause a high rate increase and was concerned he wouldn’t be able to afford the cost.
We shopped a number of options for this client and were able to find him quality first day coverage that met his 10 year life insurance requirement as well as his budget.
We can’t promise the same outcome for every client, but we do our best to find quality life insurance for every applicant.
New Business Owner on Antidepressants
A middle aged woman recently came to us after deciding to quit her job and start her own business.
To get things up and running she needed to take out a bank loan and had learned through inquiries with various banks that she would need to get term life insurance in place to be able to cover her loan.
She explained to us that she was currently on antidepressants and was concerned that this would impact her application. We looked at a number of options for her and were pleased to be able to offer her quality life insurance at an affordable rate that met her budget.
Every individual’s application is unique, so we can’t guarantee coverage. But we can promise to do our very best to meet your goals and find quality life insurance that gives you peace of mind.
Term Life Insurance Coverage – 10 Year Term – $100,000 in Coverage
Term Life Insurance Coverage – 10 year Term – $250,000 in Coverage
Term Life Insurance Coverage – 10 year Term – $500,000 in Coverage
Term Life Insurance Coverage – 10 year Term – $1,000,000 in Coverage
Annual renewable term
Annual renewable term is the cheapest form of life insurance, at least in the beginning. It’s designed to guarantee insurance durability and renewability. The policy cannot cancel. However, the premiums are designed to go up with each increasing year.
Compare level term and annual renewable term products side by side. You’ll find within the first couple of years that annual renewable term is the cheaper source of life insurance of the two. Once you get past 5 to 10 years, an annual renewable term costs much more than a level term.
The reason to use an annual renewable term instead of a level term is that your loan is short term. It may be only a couple of years. It makes more economic sense when compared to level term to pick up an annual renewable term, recover and indemnify the loan.
If you feel that having that life insurance beyond the length of the policy of the loan is important to you, look at a level term, even though it may cost more in the beginning. It is something that will be there longer and do more of the job in the long run.
Why work with a broker?
As a business owner it’s important that when you seek out life insurance options, you seek out advice from a life insurance broker. The reason is simple. The life insurance market is extremely competitive.
There are all sorts of life insurance companies that are competing for your business. When you work with an agent that represents only one of those companies your choices are extremely limited.
You may have a good product that may pay well. But it may not be the best overall choice in terms of maximizing coverage. It may not have the most economical rate for such coverage.
A broker will take what you desire to accomplish. He’ll work with different insurance companies to figure out who’s going to give you the best overall package to help you satisfy your goals.
A broker will help you to custom tailor a plan that will give you the best overall option.
Especially when it comes to health. I’ve had people with high levels of fats. People that have been overweight and smoke. People that have had some serious health issues. We have been able to get them approved for coverage. I know for sure that with other carriers that would never happen.
Take the safe bet and work with a broker. It will give you the best options for life insurance. Give yourself the best overall deal for your own identification life insurance.
If you’re interested in qualifying for life insurance to indemnify a business loan, visit my website. You can go to buylifeinsuranceforburial.com and grab a free quote.
I do ask that you message me first. You can do that by clicking the contact box; the one at the top or the bottom, and send me a quick message. Or just call me. The best way to reach me is (888) 626 0439, and speak with me live.
I hope this article had proven useful in your search for more information about life insurance.
Though we can’t guarantee coverage for every applicant, we certain offer you the best possible opportunity to get quality life insurance in place with our diverse range of providers.
To get your free quote today send us a message or give us a call at (888) 626-0439. We look forward to speaking with you.