Ways to Build Wealth
wealth building checklist to reduce your business and personal taxes
Managing against the unknown
The biggest potential threat to your wealth accumulation and the long term viability of your business is whether you get sick, disabled or die. Many business owners have life insurance to minimize business risk, especially in partnership arrangements. Usually life insurance is used in the event of the death of a business partner to ensure the partner’s estate is paid out with the proceeds of insurance. This allows the existing partner to accumulate all of the outstanding shares.
In fewer cases, there is a surplus of insurance designated to give an influx of cash into the business upon the death of a partner to provide the business with a float of cash until the business is able to transition through the tragedy. The likeliness of such an event is fairly rare.
The item that many businesses don’t mitigate against is if one of the business owners or key employees gets critically ill. Not only is there a larger likeliness of this occurring but even fewer partnership agreements address this issue at all with any clarity. Without Critical Illness insurance in place, the business is expected to weather a very difficult storm without a lifeboat. Not having Critical Illness insurance is a massive business risk that is easily mitigated.
The other element to address is what happens in the event of one of the key players becoming disabled. How does the business deal with it and how does the partnership agreement address it?