Three Types Of Insurance Every Entrepreneur Needs
As an entrepreneur, you are probably used to dealing with uncertainty. Starting a new venture in an undefined market with an untested customer base is the epitome of uncertainty. Most may not know it as you do, but that is the very uncertainty that defines life. You may have also figured out as an entrepreneur that you must hedge your bets against potential loss. Picking the right insurance policy is very similar to picking the right venture. It means that you minimize the chances of irreparable loss if the unthinkable happens.
All too often entrepreneurs are dramatically slowed down by “black swan” events. Here, we will discuss the three types of insurance you will need as an entrepreneur to protect your ventures, your family and yourself.
Two things are certain in this life: death and taxes. Now while we can maneuver taxes and perhaps hope they get lowered, death is of a permanence we cannot control.
Life insurance is a partial answer to the puzzle of death. As an entrepreneur, your family may depend on you as a breadwinner. As you are not employed formally, you may not have the luxury of company-sponsored insurance schemes. Taking up life insurance is therefore a must.
You may opt for either term life insurance or permanent life insurance. The former, as the name suggests, is for a period. Perhaps 20 years. After the term lapses, you get paid a lump sum. Permanent life insurance is only payable after you die. It is paid to those who survive you. In both cases, the money paid out goes a long way in covering funeral expenses, federal death (estate) taxes and creditors.
Do note one major factor. Depending on your type of entrepreneurship, it might be a smart idea to opt in for AD&D (accidental death and dismemberment insurance). The problem with life insurance is that it only pays out when you die.
Imagine you are in an accident and you survive but are left maimed and unable to work. If you died, your family would be well off – but you did not, so now you are at risk of transforming from the breadwinner to a financial burden. This is where AD&D comes in. According to Meetfabric.com, entrepreneurs who are involved with riskier businesses or hobbies such as extreme sports, driving, construction and a few others are the ones that would benefit most from AD&D.
The chances are you losing an eye-ball to your office stapler are pretty low, so AD&D is not for everyone. But if you are one of the more risk prone people out there, then it is an important option to consider.
In other words, when you walk out of life, your insurance walks in.
As an entrepreneur, chances are you own a car. Driving a car without auto insurance is illegal in most states. Some states, however, only require third-party auto insurance. This covers only the damage to the other car and any harm to passengers in the other car. However, some states require you have comprehensive auto insurance. This covers both your vehicle and the other vehicle. This also includes occupants of both cars.
For an entrepreneur, this is unavoidable as you probably move around a lot. You also must manage your expenses as a costly accident could cripple your finances. Imagine having to pay for someone else’s car and whatever medical bills that other person concocts.
Auto insurance also applies to commercial vehicles. Again, this could either be third party cover or comprehensive cover. One thing to note is if you have third party auto insurance and your car gets totaled or stolen, the insurance company will not compensate you. That is why comprehensive auto insurance is highly recommended. Finding out what requirements your state has on auto insurance is the first step to getting the right auto insurance cover.
Finally, health insurance is a must for entrepreneurs. Entrepreneurship is a stressful field. There can be crushing amounts of uncertainty and unrelenting pressure as you build your business. In such a scenario, you do not want to fall ill and not have health insurance.
Health insurance allows you to walk into a hospital, receive treatment, and leave without paying a thing. The cover also allows for medical checkups. While most people get health insurance through their employer or their spouse/ partner’s employer, there are policies available for entrepreneurs.
These are often termed as self-employed health insurance covers. You can purchase these polices from most insurance companies that offer health insurance. The average cost as per a 2016 Department of Health and Human Services survey was $106 per month after subsidies. This gives a rough indication of how much it would cost you. Factors that will push this figure either up or down include copay arrangements, level of cover, inclusions and exclusions, among others.
While insurance often seems like an unnecessary expense, statistics bear it out: 100% of Americans will die; 100% of Americans will fall sick in their lifetime; 100% of Americans who drive will have at least a 1% risk of having an auto accident in their lifetime. With such statistics, it is easy to see why everyone needs these three types of insurance, and not only entrepreneurs.
For the last 22 years Brandi Zeledon has worked for major firms analyzing market data, interviewing world-class entrepreneurs, and studying global finance. With the massive demand for accurate, potent, and game changing information out there, she decided to start her Bulletproof Financing blog. By combining her passions for finance and writing, she has now found the perfect medium to continue her career.