Starting a company can be difficult. Not only do you need to actually build a business and start to find customers, but you have to get your head around a huge amount of administrative and financial ideas that most people may never have to face during a lifetime of employment. On the business side of things, some of these ideas include how to structure the company, whether you need to raise finance, and if so, whether that should be via debt or equity. And on a personal level these questions might be whether to join a private healthcare plan, when to start a pension, or whether you need cover like life insurance.
What is life insurance?
In broad terms, a life insurance policy offers you piece of mind that your family is taken care of after if you pass away. A life insurance policy will pay your spouse and/or children a tax-free lump sum and possibly provide a further yearly income for a specific number of years, which means that they will likely be able to continue to pay the mortgage, school fees, health insurance and other expenses, and get them through what would be a very difficult time.
What are the benefits of life insurance?
Each life insurance product is unique in terms of the payout amounts and exactly what benefits they offer. However, they are generally provide some or all of the following benefits:
1. A payout upon your death
As the name “life insurance” would imply, the most critical part of any plan is the amount that is paid out to your family when you die and how this is structured. Life insurance payouts are generally tax-free, and can include a single lump sum and/or monthly payments to replace your income for a number of years.
2. A payout if you develop a chronic or terminal illness
Some life insurance policies also include coverage for chronic or terminal illnesses. This is important as if you are affected by such a severe illness your family finances would be impacted in much the same way as if you died – you would have no income and higher expenses.
3. A payout if you need to have care or go into a nursing home
Similar to the payouts for chronic or terminal illnesses, some policies will cover your expenses if you need round-the-clock care or need to be under supervision in a nursing home. Such care can be expensive, and knowing that the cost could be taken care of can provide piece of mind should you ever need to face such difficult circumstances.
What are the drawbacks of life insurance?
The main downside of life insurance, just like any other form of insurance, is the cost. Life insurance is a type of cover, where you pay for the plan every month and hope that all of that you will never have to rely on the cover it provides. When you are bootstrapping a business and funds are tight and you are living off ramen noodles, that little extra expense every month can feel difficult to justify at times.
Do you need a medical for life insurance?
As life insurance policies generally provide cover in the event of you becoming seriously ill or dying, it may be a surprise that some insurance firms do not ask for a medical before providing you with cover. You will still generally be asked a series of questions about your health, but how deep these questions may go varies by the insurer, so if you would prefer not to have a medical exam or have a condition or lifestyle choice for which some policies may deny you cover, a policy that does not ask for a medical may be your best option.
As a startup founder, is life insurance money well spent?
As with all insurance, whether taking out a life insurance policy is right for you depends on your tolerance for risk and whether you have any dependents. If you are young, healthy, and single then the question as to what might happen if you died is very different to someone who is a little older, has a mortgage with their spouse, and a child or three. The question should always be how will those around you be affected, and if you have a family of your own you will want them taken care of, whilst if you do not have any dependents you may prefer to keep the extra money in your pocket and roll the dice.
life insurance without a medical exam
https://meetfabric.com/blog/how-does-a-no-exam-life-insurance-policy-work