As a 20-something year old entrepreneur, I thought I was invincible. The amount of bravado that young business owners walk around with is, both inspiring and disarming. “What could happen to me?, besides I’m not married and don’t have any kids. So why would I need insurance to protect my business?” The naive, yet not so innocent words uttered from a much younger version of myself. I reflect back to those early days, and wished I’d given myself a swift kick in the pants.
The one thing that 2020 has taught me, life can be so random.
Perhaps back then, life insurance shouldn’t have been my biggest priority. My bigger focus should’ve been disability insurance or critical illness insurance. I did some crazy things in my 20’s, always seemingly testing my invincibility theory. If any of those events had turned out otherwise, my life could’ve been much different.
I recall a long weekend ski trip to Lake Placid, NY, in my mid-twenties with a few buddies. You know the kind of weekend I’m talking about; ski hard all day and party into the wee hours of the night. Repeat. The second day of skiing brought freezing rain and a number of the hills had been closed by the ski patrols due to excessive ice patches. My friends and I decided to defy the closed hill signs and ski some of the Black Diamond runs anyway. My friends had taken off ahead of me and I had to catch up to them.
I should preface things by saying I was a pretty good skier. It was also before the days where helmets were not commonly worn.
I was traversing down the edge of the ski hill, where the ice wasn’t as bad, doing tight little turns while maintaining quite a bit of speed. I must’ve caught an edge and it propelled me over the edge of the run, and into the trees.
I don’t recall what happened but I must’ve been thrown into a tree, where the impact sent me back onto the ski hill. I came to, dazed and confused but for the most part intact. I looked up the hill, only to see a yard sale of my belongings; skis, poles, hat and goggles spread up the hill about 50 meters from where I currently lay. My head was throbbing. I took a moment to recall where I was. My friends were nowhere in sight. I made the slow and awkward saunter up the hill to collect my equipment. I realized immediately that I had a concussion. I gathered my things, put on my skis and cautiously made my way down the hill and checked myself into the ski patrol infirmary. They confirmed my self-diagnosis of a concussion.
I often look back on that day, as my first realization of martyrdom. What would’ve happened if I collided with the tree and it sent me into the forest, and not back onto the hill? What would’ve happened if the severity of my concussion or any other injury that limited my ability to work for a significant period of time. Reality is, I can still work with a broken arm or leg, but a serious brain injury represents a completely different situation. If I wasn’t able to work, I wouldn’t be able to pay any of my bills.
I knew of someone that had suffered a concussion by slipping and smashing the back of her head on the ice. She was unable to get back to work for over two years! She still suffers from the symptoms of post-concussion syndrome.
I think to myself, what if that would’ve happened to me?
Disability insurance represents a source of income replacement while you focus on getting better. Unfortunately, your monthly bills don’t go away if you get disabled or injured.
Critical Illness Insurance
I think back to my late thirties where I was diagnosed as having a second grade melanoma on the top of head. I had surgery to excavate around the place where my melanoma had been, and now have a permanent reminder with an obvious divot carved out of the top of my head. I was fortunate in that it had been discovered early and hadn’t gone into my lymph nodes. I was lucky, because although melanoma can be quite serious, we addressed it in time.
Thinking about that recently, as a friend of mine had just discovered she had terminal brain cancer.
I thought to myself, what if that had been me?
Fortunately, she had purchased a critical illness insurance policy several years ago. It will pay her a lump sum of money, to do with as she chooses. She has a big enough battle ahead of her without having to worry about paying her bills too.
Key Person Insurance
Even if you aren’t married or have children, owning a business is like having a family. Your employees become a part of your extended family. You feel a responsibility and obligation, to not only look after your employee, but their families as well.
In my last business, we would have our annual holiday party, where employees would bring their spouses and kids. I remember looking out into this sea of people, which amounted to almost 200 people. I remember feeling very proud, and yet very scared about how many people were dependent upon our business. It wasn’t only my wife and three kids depending upon our business. My business was dependent upon me being healthy, able and willing to do whatever was needed to look after my big, extended family
I was a vital part of my company running smoothly and remaining profitable. If I wasn’t there, my absence would leave a gaping hole in how things got done. Not that I wasn’t replaceable, but had I got sick, disabled or died, it would’ve represented a significant obstacle for the company to overcome. Keyperson insurance represents a much-needed source of cash to help ride out the storm until I got better or they were able to replace me.
Buy-Sell Insurance/ Partnership Insurance
If you die, and you have business partners within the business, what happens to your shares? How does money get into the hands of your beneficiaries? How do your shares get bought out? Buy-Sell insurance represents the most cost-effective way of getting money out of the business in a tax-preferred manner. It ensures the ownership remains in the appropriate hands, to continue running the business.
So where was that invincibility cloak now?
Chris Coulter is the Founder and President of The Finish Line Group. He works with business owners to leverage their businesses to increase their wealth, reduce corporate and personal taxes, create viable succession strategies, enable employee retention strategies and allow them to exit their businesses on their terms.
Chris’ passion for what he does evolve from the mistakes he made in his first business; by not diversifying his risk and not utilizing a lot of the opportunities within his business to create significant wealth. Chris found out the difficult way and now educates business owners on how to avoid many of his former oversights and ultimately control where their finish line ends.