Life Insurance and Your Austin Startup
March 11, 2015
Why Life Insurance for Your Austin Startup?
Life Insurance for your business is insurance tied to the life of the entrepreneur or key employees of a company. It is of particular importance to indebted startups or companies that profit primarily from a few dedicated human geniuses. I encourage any Austin startup that has business co-operators reliant on them or personal dependents counting on them to research prices and policies. This is a policy typically covered by the business as a business expense just like any other business insurance and the payouts are made to the entity. Some business oriented life insurance policies are referred to as Key Person insurance and it is important to ensure that the policy will cover instances of incapacity as well as death, because either will take leaders away from operating a company. Business life insurance recognizes that the success of many young or small companies are wholly tied to the work of one or a few individuals and provides a payout in the instance that those individuals are prevented removed from operating the organization. In this way, the company can make ends meet until dissolution is complete or a new key person is engaged in the entity. Specifically, the company life insurance policy should be large enough to cover the following:
talent search, hiring, and training of a replacement
payoff of outstanding debts
obligations to investors
severance or buyout obligations to employees
the costs of winding down, which will likely include attorney fees, fees to the Secretary of State, administrative personnel time, accounting fees, contract termination fees, and lease buyouts
Protecting Startup Families
This policy is also protective of the family and dependents of an entrepreneur or owners. It is an unfortunate reality that many companies do not have adequate protections separating their entity from their personal affairs. Common reasons this may be true are because the company has poorly drafted entity agreements, no entity agreement at all, or the entrepreneurs so co-mingle their business and personal affairs that a court does not recognize the entity as separate from the person. Key person, or business life, insurance can provide the financial cushion to ensure that the obligations of a business owner do not take resources away from the family of those individuals.