By Joel Zimmerman

How Life Insurance Can Help New Businesses Manage Risk


As any entrepreneur will tell you, starting a business isn’t easy. There’s no avoiding the risks associated with a startup, regardless of the market conditions, the economic climate, or the amount of resources you’ve utilized. It’s particularly challenging for new businesses to develop an effective risk management strategy.
Such issues are especially problematic for young people hampered by their lack of experience in the corporate field. Life insurance can help lower the inherent risks of launching a new venture.

How Can Life Insurance Help?

You may think buying a life insurance policy is simply an extra cost when you’re struggling to launch a venture, but in truth, it can provide significant value to your business. Insurance protects against unforeseen developments that may otherwise cripple a small company.

Unfortunately, many fledgling companies are underinsured. The reason for this is twofold: small business owners don’t have sufficient funds to cover all the bases and secondly, they are unsure about which aspects of the business to insure. This is where it helps to understand the life insurance definition as well as the types of protection available.

Steps to Managing Risk

These steps can help you manage startup risks more effectively:

  • Do Your Homework

Look around at other businesses like yours. Take note of aspects such as their locations, staff management, equipment and other assets, working hours, etc. Assessing your competition is the first step to building a successful enterprise.

  • Keep Abreast with Market Trends

It’s important to know what’s trending and what’s not. Customer trends change on a near-daily basis, so it’s important to keep a by-the-minute track of market tastes and preferences. See if your business idea has solid potential or if it’s just a passing fad.

  • Evaluate Your Strengths

Your business should have a clear selling point that leaves a strong impact on customers. Make sure the business idea you’re marketing makes full use of your capabilities and incorporates the right skill sets. If there are areas you don’t have the right expertise in, see if the gaps can be filled in by your business partners or your employees.

  • Take Stock of Your Funds

Make sure you are covered in case your business doesn’t yield income in its first year. It’s helpful if your partner or spouse has a stable job that pays out employee benefits like health insurance. Both term life insurance and whole life insurance give you extra savings to supplement your needs during times of hardship.

  • Keep a Check on Market Conditions

Markets are very unpredictable. It’s very important to keep track of economic conditions so that you don’t get a nasty surprise when and if things suddenly take a turn for the worse.

  • Create a Business Plan

A business plan is a useful tool to help you run your company in an efficient and productive manner. Insuring your business is a firm step towards risk management. By exploring various life insurance types, you can ensure your company’s interests are covered in times of shaky economic conditions or in the event of business failure.

  • Set Aside an Emergency Fund

The key to effective risk management is to set aside a pool of emergency funds to carry you through the rough patches. This helps you cover any losses incurred during the early stages without hampering the running of the business.

Why Does a New Company Need Insurance in the First Place?

Here are the top benefits of insuring your startup:

  • Financial Security

From burglary to fraud, a million things can go wrong for new businesses. By getting your business insured, you can protect it from incurring losses during its early stages.

  • Credibility

Insuring your business gives you greater credibility in the financial world. You’ll have an easier time gaining financial support like loans. Since you’re insured, banks and other lenders consider you less of a risk and will be more willing to lend funds to you.

Insuring your business can help lower the risks of running a startup, and the tax benefits of life insurance can be a great help too. At LifeCentra, our financial experts can assist you in formulating a seamless insurance plan that fits in your business needs, so get in touch with us to discuss your options today!

Leave a Reply

Your email address will not be published. Required fields are marked *