Many small and medium-sized business owners are unaware of the importance of a business life insurance policy to their firm’s profitability. Since it has monetary value, whole life insurance benefits business owners in a way that other types of insurance do not. This monetary value accrues over time due to interest and dividend payments.
The truth is that all business owners require whole life insurance, regardless of size. It can help businesses bypass typical banks and loans, benefit their employees and win tax breaks.
As the contractual owner of a life insurance policy, the business owner has first rights to the accumulated cash value. The business money is returned to the life insurance company for future business expenses.
Instead of paying a financial institution hefty interest rates, the business owner can finance their expenses in a way that allows them to recoup an interest cost.
Employers can choose to purchase life insurance for their employees. This allows business owners to receive a tax break for paying the insurance and use the policy’s cash value. The business owner can choose between naming the employee’s estate as the policy’s beneficiary or their company as the beneficiary.
Allowing the employee to choose the recipient is a fantastic benefit that firms may offer.
A “buy-sell agreement,” a type of whole life insurance scheme, is an excellent business exit strategy. Each business owner is given whole life coverage under this plan.
When one business owner dies, the surviving business owner will utilize the death benefit earnings to purchase the deceased business’ portion of the business.
A “key person” policy, similar to a buy-sell agreement, allows firms to safeguard against income loss due to the loss of key people. Business owners can fund these policies and use policy loans to finance current and future business expenses and liabilities.
The policy’s death benefit offers business owners funds to offset the cost of filling vacancies left by important staff departures.
There are various tax advantages to purchasing whole life insurance. Distributions can also be taken tax-free with good planning. Estate-planning procedures ensure that the proceeds of a death benefit are not included in the estate tax computation.
When an employer pays life insurance premiums into a policy on behalf of an employee, the premiums may be tax-deductible.
Life insurance for business owners is a valuable asset that may be used since it offers flexibility, growth, and security. Whether your company is massive or small, having business life insurance should be one of your top responsibilities.
Due to the rising costs of group health insurance plans, employers are looking for more affordable solutions to offer employees health benefits. Many are turning to Health Reimbursement Arrangements (HRAs), which allow your company to provide tax-free reimbursements to workers for healthcare expenses. Here’s a look at five advantages of HRAs for businesses and their employees.
Group health insurance plans have become consistently more expensive over the years, and annual rate hikes when it’s time to renew. Consequently, it’s becoming increasingly difficult for small businesses to adopt group plans. Offering each employee an individual health policy, though, is more affordable. The HRA model allows employers to provide workers with a fixed monthly allowance to spend on healthcare expenses.
HRAs come with health insurance subsidies, also known as premium tax credits, for low-income individuals through health insurance marketplaces. Group insurance plans, by contrast, are more expensive to begin with and don’t offer subsidies. Providing employees with a stipend, which is a fixed allowance and isn’t tax-free, makes HRAs the more attractive option.
The main problem with offering a one-size-fits-all group plan is that it doesn’t give individual employees choices in which doctors they see, coinsurance, or monthly costs. Reimbursing employees for their healthcare expenses at least allows them to choose their own doctor, plan, and budget. Without this flexibility, some employees may decide to look for other work since customized healthcare is more appealing.
Due to the complexity of requirements and lack of flexibility, many small and medium businesses are finding it hard to embrace group insurance plans. A group plan typically requires a minimum number of employees to be listed, which isn’t going to work for teams comprised of workers who want control over their healthcare coverage. If several workers are already enrolled in Medicare and family plans or don’t want to opt-in, your company may not even be able to offer a group plan. Your company will be free of such restrictions through HRAs.
Insurance portability means employees can take their health plans with them if they switch to a new employer. Many workers want this flexibility since it’s becoming more common for people to reassess their careers. Providing the HRA option shows you care about the health and wellbeing of your employees while allowing them to have flexibility in planning their future careers.
Health Reimbursement Arrangements are more attractive than group plans for a growing number of small businesses these days. HRAs create less friction for both employers and employees while providing more flexible coverage. Letting workers choose their own health networks and doctors gives your company an edge in attracting new talent. Contact us at Abatelli Group Inc. for more information on securing the right healthcare plan for your business.