6 benefits of whole life insurance for business owners

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. Thankfully, as you develop a strategy for your company to respond to unforeseen events, there’s something that can help with your holistic financial strategy: whole life insurance for business owners. 

The basics of whole life insurance

Many people are familiar with the benefits of whole life insurance for their personal lives. Traditional whole life is known for its important core value — in the event of an unexpected death, the policy will provide financial support for the policy owner’s loved ones. But whole life insurance can do more than this, including supporting you in your professional life.  

Whole life insurance offers lesser-known benefits

You may be surprised to learn that you can experience the benefits of whole life insurance before tragedy strikes. Here’s how: as you pay your whole life premiums as agreed, your policy accumulates cash value.1, 2 Simply put, it becomes an asset. You can then use this money to fund major expenses in your life, whether that’s putting a child through school, buying a home, supplementing your retirement income — or building your own business.3 

Whole life insurance for business owners can play a key role

There are many benefits that come along with being a small business owner, including being your own boss, building the company you want and more. On the flip side, however, you might not have access to certain retirement plans, employer-sponsored life insurance or even sick pay, like you would if you were working for a large employer. This is where whole life insurance comes in: it may be able to help solve these and other challenges that business founders face.

The guaranteed cash value of whole life

One key difference between a whole life insurance policy and other types of insurance, like term life, is its cash value component. As premium payments are made into a policy, the cash value grows, tax deferred.4 Further, one of the advantages of the cash value is that a policy owner can make a withdrawal in the event of an emergency or something unexpected that could arise for a small business.

How would this apply to your business? To better understand the possibilities of whole life insurance for business owners, consider these six scenarios for your company. In every case, these expenses may be covered by the cash value of a whole life policy.

1. Sick leave 

As a business owner, you may feel pressure to keep your company humming along no matter what. But everyone, including you, has days when they do not feel 100 percent. In fact, while some experts thought the pandemic would normalize the need to take sick days, they’re finding that’s not the case. People are still showing up sick to work. Unfortunately, this slows down their recovery time and threatens to spread an illness around the shared work space.5 Instead of pushing yourself, it’s smarter to take the time you need to feel ready to return to work. When you have access to the cash value of whole life insurance, you can use it to help cover bills and expenses, especially if one sick day turns into many.

2. Business or office rent

In an average year, rent is one of the biggest expenditures for many small business owners. By using the cash value in your whole life policy, you can help offset your commercial rent. Or this money can cover the entire rent if your business needs to close due to illness or any other reason for a brief time.

3. Disaster preparedness

Natural disasters cause billions in damages and lost business revenue every year. While business insurance often covers many costs associated with disasters, there can be gaps. As many entrepreneurs have learned, even events like a global pandemic aren’t always covered, leaving owners to scramble. In these cases, cash value from a whole life policy may help replenish some of your company’s lost revenue or cover needed repairs.

4. Cash flow

Cash is the lifeblood of your business. It can be stressful to worry about potential interruptions due to a lack of cash flow, yet these kinds of slowdowns are common in most businesses. There may be times when you’ll need extra cash to tide you over. In this case, the accumulated cash from a whole life policy can be readily available. Gaining access to this money can keep your company running smoothly if bills need to be paid during one of these times, and you may not face any financial penalties in the process.

5. Business expansion plans 

You’ve heard the phrase, “it takes money to make money,” right? Well, sometimes business owners can easily see how their company would grow if they invested more in key areas. If you come to this place in your business, the money that has accrued in your whole life policy can be used in this way. Much like you could use your whole life cash value towards something like a home purchase, you could also leverage it to help expand your business — whether it’s for a larger location, more inventory or more employees.

6. Vacation time: Time off 

That’s right, a much-deserved vacation. Small business owners rarely take time off. In fact, one study found that business owners tend to work 72 hours a week — nearly double the standard 40-hour work week!6 A vacation can restore your body and spirit, as well as give the great people you’ve hired the chance to demonstrate that they can handle running things for a while. There’s no restriction on how you use your whole life cash value, even if it’s to pay for a trip and get some rest.

A financial professional can guide you to the right whole life policy

You’ve worked hard to build your business, and you want it to thrive for a long time to come. When you integrate a whole life policy into your business strategy, you provide a new level of protection for your company, for many of the unexpected twists that come your way over the years. Through working with a financial professional, you’ll be able to determine the optimal policy for your business. 

Brought to you by The Guardian Network © 2022. The Guardian Life Insurance Company of America®, New York, NY

2022-140598 Exp. 9/2024

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1 Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.

2 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.

3 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

4 Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

5 Experts predicted Covid would normalize the sick day. It’s done the opposite. NBC, July 19, 2022

6 Successful Entrepreneurs Take This Number of Vacations Every Year. Here’s Why. Inc, Jan. 22, 2019