Many small-to-medium-sized business owners don’t recognize how beneficial a life insurance policy can be to the success of their business. Whole life insurance can help companies break free from traditional bank loans, benefit their employees, and gain tax advantages. In addition, whole life insurance for business owners has an advantage over many other types of insurance: It earns cash value.
This cash value accumulates over time due to interest earned and dividends paid. The business owner has first rights to its accumulated cash value. When business expenses rise, the owner can take a policy loan up to the amount of the cash value in the policy to cover these costs. The capital is then funneled back to the insurance policy, so funds can become available for future business expenses. Instead of paying high-interest rates to a bank, the business owner finances their expenses in a way that allows them to recapture the cost of interest.
A whole life policy can also be part of an exit strategy, if purchased for each business owner. When one owner passes away, the surviving owner can access the death benefit proceeds of the policy, enabling them to buy the deceased business owner’s portion of the business. Another reason a business owner needs whole life insurance is to prepare in case one business owner leaves due to illness, disability, or retirement. When this happens, the life insurance contract is simply assigned to the remaining owner(s) which gives them complete access to any cash value, increasing business cash flow.
When it comes to taxes—contractors, freelancers, or anyone self-employed—can benefit from whole life insurance. These self-employed workers are responsible for more taxes, as there isn’t an employer covering a portion of their Social Security tax or Medicare tax. The tax advantages of whole life insurance can help offset these expenses.
The tax benefits of whole life insurance for business owners include tax-free retirement income, tax-free policy loans, and tax-free use of cash value growth. Plus, policies earn interest and dividends tax-free. So regardless if you’re a large or small business, owning the proper insurance should be one of your priorities. Call us at (540) 720-5656 and let’s discuss ways to maximize the benefits of life insurance for your business.
Amy Anderson joined the ILG Financial team in 2023 as the client relations coordinator. Her responsibilities include scheduling of appointments, annual check-up notifications, and annuity and required minimum distribution assistance. She is a graduate of Harding University with a degree in Computer Information Systems. Amy and her husband have two children and she enjoys reading, crocheting, music and spending time with her family.
Chase Lopez joined the ILG Financial team in 2020 as an advisor. Chase is a 2016 James Madison University graduate with a degree in management. Chase has been trained under the tutelage of Dave Lopez, who is not only the founder and managing member of ILG Financial, but also is Chase’s uncle and godfather. He also enjoys working alongside his cousin, Megan, who is Dave’s daughter. Chase, as a fiduciary, believes in putting his clients interests first, and building out plans for his clients where they can have a happy and fruitful retirement. He married his beautiful wife in February 2022 and both use most of their free time chasing around their little pup, Aurora.
Jessica Carson joined the ILG Financial team in 2018 as an agent. Jessica and her husband have four children, two dogs, 3 barn cats, 5 chickens, and three parakeets. She indeed loves her children and pets! When not at work, Jessica enjoys playing the piano and cello as well as traveling and spending time outside with her family, hiking, fishing, and boating.
Terri Center joined the ILG Financial team in 2019 as client services manager. She handles client records, application processing, and gathering information to provide a professional and friendly experience with all of our clients. Terri is a graduate of Oakland University. She is married and has two children. She enjoys hiking, family time, and puzzle challenging video games. She also likes to share her creativity in her canvas paintings and sewing projects.
Megan Jones joined the ILG Financial team in 2020 as marketing director. Megan and her husband live in Fredericksburg, VA with their German Short Haired Pointer, Gus. Megan is a graduate of Longwood University and holds a degree in communications. Megan is the oldest of Dave Lopez’s three children and not only enjoys working alongside her father, but also with her cousin, Chase, who joined the ILG Financial team in 2020 as an advisor. When not at work, Megan enjoys sitting on the back porch with family and friends enjoying food and music.