4 Ways Whole Life Insurance Can Help with Business Expenses

Owning a small business is a dream for millions of Americans. It’s exciting, but it’s also a huge commitment that comes with a unique set of challenges, including planning for the unknown. Did you know that whole life insurance can be a pivotal part of that strategy?

Traditional whole life insurance is commonly known for its important core value – protecting a policyowner and their family from the unexpected. But with many living benefits, it can also play a role in helping to protect the owner’s business too. While there are benefits that come along with being a small business owner, the flip side is that you potentially might not have access to certain retirement plans, an employer-sponsored life insurance or even sick pay, like you would if working for a large employer. Whole life insurance may be able to solve for these and some other challenges that business owners face.

One key difference between a whole life insurance policy and some other types of insurance, like term life, is its guaranteed cash value component.1 As premium payments are made into a policy, the cash value will grow2, tax deferred.3 One advantage of the cash value is that a policyowner can make a withdrawal in the event of an emergency or any other unknown issue that could arise for a small business4

Here are some examples of expenses that may be covered by using the cash value of whole life.

Rent: In an average year, rent can be a big expenditure for many small business owners. In fact, it’s higher than ever right now. Access to cash value may help offset or cover rent if your business needs to close for illness or any other reason for a brief time.

Sick time: When you’re feeling under the weather, there are days when you just can’t or shouldn’t push through it and you’ll need to take an unpaid day off.  Access to cash value can help cover bills and expenses, especially if one sick day turns into many.

Disaster preparedness: Natural disasters cause billions in damages and lost business revenue each year. While business insurance often covers many costs associated with disasters, there can often be gaps. As many learned, even events like a pandemic aren’t aways covered, leaving owners to bridge that gap. Cash value from a whole life policy may help offset some lost revenue, or to cover repairs.

Cash flow: Cash is the lifeblood of your business. Yet, cash flow slowdowns are inevitable in any business, so there may be times when you’ll need extra cash to tide you over. Having access to funds can help if bills need to be paid during one of these times.

Expanding your business: Much like you could use your cash value towards something like a home purchase, you could also leverage it to help expand your business – whether a larger location, or more inventory or staffing.

Time off: That’s right, a much-deserved vacation. Small business owners rarely take time off. In fact, it’s reported that fewer than 14% take time off for themselves every 2-3 years. There’s no restriction for how you use the cash value, even if it’s to pay for a trip and get some rest.

Another bonus of the cash value is its accessibility. The cash value from a whole life policy can be readily available and may not face any penalties when accessed.

As you take a holistic look at planning your business, consider how whole life can be a part of that strategy.

Discuss your preparedness strategy today with your financial professional.

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