Okay, this might be an over exaggeration that life insurance is the most important tool. But we occasionally come across situations where it is overlooked as a planning tool altogether and we don’t want you to inadvertently make that mistake. There are a number of reasons we feel strongly that life insurance should be thoughtfully considered by every business owner.

• The cost of not having insurance is too big a price to pay

Neglecting insurance discussions can be a dangerous oversight. The last year there has seen high profile tragedies that have taken the lives of successful business owners. Under- funded and poorly drafted Shareholders’ Agreements have put surviving shareholders and estates in difficult financial positions. Adequate and properly arranged life insurance would have avoided this problem.

• Insurance is not as expensive as you think

There is often a presumption that at older ages insurance is simply too expensive. Not so! We recently placed a policy on husband and wife to fund a tax liability of several million dollars.  Both spouses still wonder if the insurance company made a mistake! They can’t see how the accumulated premiums will ever be anything close to the payout upon their deaths.

• Insurance is less expensive than self insuring

Counting on existing wealth to pay liabilities and/or commitments when a death occurs has three inherent oversights;

1. It may be that the wealth cannot readily be turned into cash when it is needed.
2. Borrowing to pay estate obligations may negatively impact debt servicing and other banking ratios.
3. Even if there is liquidity in one of your companies, there will be tax to pay when the money is withdrawn. This tax can even be greater than what insurance would cost.

There are many more reasons to consider life insurance as a tool to Succession and Estate Planning, but I have already taken up the 30 seconds. We would like to tell you more. Please contact us for more information.