Best Life Insurance for Small Business Owners

Owning a small business means wearing many hats—CEO, accountant, marketer, HR department. Life insurance might not be top of mind when you're focused on payroll, inventory, and growth. But for business owners, the stakes of inadequate coverage are even higher than for employees.

Your death doesn't just affect your family—it affects your business, your employees, your partners, and potentially your customers. The right life insurance strategy protects all of those stakeholders.

Why Business Owners Need More Coverage

Small business owners typically need more life insurance than employees with similar incomes. Here's why:

Personal guarantees: Most small business loans require personal guarantees. If you die, creditors can come after your personal assets—and your family—to collect. Life insurance ensures those debts can be paid without devastating your family's finances.

Business continuity: Your business might represent a significant portion of your family's net worth. Without proper planning, your death could mean the business dies too, eliminating that value.

Income replacement complexity: Your income as a business owner might be irregular, combine salary and distributions, or be tied up in business growth rather than personal compensation. Calculating true income replacement is more complex.

Employee obligations: If your business has employees, their livelihoods are connected to your business survival. Life insurance can help ensure the business continues or transitions smoothly.

Personal vs. Business Life Insurance Needs

As a business owner, you actually have two distinct life insurance needs:

Personal protection: This covers your family's needs—income replacement, mortgage payoff, children's education—just like any other individual. This is the foundation.

Business protection: This covers business-specific needs like loan payoff, buy-sell agreements, key person coverage, or business continuation funding.

Many business owners make the mistake of getting one policy and trying to serve both purposes. That can work for small amounts, but as needs grow, separating personal and business coverage often makes more sense.

Calculating Coverage for Business Owners

Start with personal needs:

Income replacement: Use 10-15x your take-home income (the amount you actually live on, not your business revenue). Our income replacement guide walks through this calculation.

Personal debts: Mortgage, car loans, credit cards, student loans—everything you'd want paid off for your family.

Future obligations: Children's education, spouse's retirement support, and other long-term needs.

Then add business-specific needs:

Business debts with personal guarantees: Any loans you've personally guaranteed need coverage so creditors don't pursue your estate.

Buy-sell funding: If you have partners, enough coverage to fund your share of a buy-sell agreement.

Key person coverage: If your business needs funds to survive the transition period after your death, factor that in.

Let's look at an example:

Maria owns a marketing agency. She earns $150,000 in salary/distributions, has a $450,000 mortgage, and two kids she wants to send to college. She also has $200,000 in business loans she personally guaranteed.

Personal needs:

• Income replacement (12x): $1,800,000
• Mortgage: $450,000
• College fund: $200,000
• Other debts: $50,000
• Personal total: $2,500,000

Business needs:

• Business loans: $200,000
• Business continuation fund: $150,000
• Business total: $350,000

Combined coverage need: $2,850,000

Maria rounds up to $3 million, which is achievable with providers like Evoro that offer coverage up to $5 million.

Buy-Sell Agreements and Life Insurance

If you have business partners, a buy-sell agreement is essential—and life insurance is typically how those agreements are funded.

A buy-sell agreement determines what happens to your ownership share if you die, become disabled, or want to exit the business. Life insurance provides the cash to execute that agreement.

Without a buy-sell agreement funded by life insurance:

• Your heirs might become unwilling or unprepared business partners
• Surviving partners might not have funds to buy out your share
• The business might need to be sold entirely or liquidated
• Family members might fight with business partners over value and control

With proper planning:

• Your family receives fair value for your ownership share
• Surviving partners retain control of the business
• The transition happens smoothly according to predetermined terms

If you have partners, work with a business attorney to create a buy-sell agreement and calculate the insurance needed to fund it.

Key Person Insurance

If your business depends heavily on you—your relationships, expertise, or vision—key person insurance can help the business survive your absence.

Key person insurance is owned by the business, with the business as beneficiary. The death benefit provides funds for:

• Recruiting and training your replacement
• Maintaining operations during transition
• Reassuring customers and creditors
• Covering revenue shortfalls during the adjustment period

This is separate from personal life insurance that protects your family. It's specifically about business survival.

What Business Owners Should Look for

When choosing life insurance, business owners should prioritize:

Adequate coverage limits: Your combined personal and business needs might exceed what some providers offer. Evoro's $5 million maximum can accommodate substantial business needs.

Financial stability: You're planning for scenarios decades in the future. Choose carriers with long track records and strong financial ratings. Symetra, Evoro's A-rated partner, has over 65 years of stability.

Speed: Business owners are busy. An efficient application process matters. Evoro's SwiftTerm technology gets most healthy applicants approved in 16-18 minutes.

Flexibility: Business needs evolve. Look for providers who can accommodate changes as your business grows.

Term vs. Permanent for Business Owners

For most business owners, term insurance handles the majority of needs:

Personal protection: Term coverage during your earning and obligation years is typically sufficient and most cost-effective.

Buy-sell agreements: Term coverage often works, though some agreements use permanent insurance for various reasons.

Business debt protection: Term coverage aligned with loan terms is usually appropriate.

Permanent insurance might make sense for:

• Estate planning for larger estates
• Funding complex buy-sell structures
• Situations where lifelong coverage is genuinely needed

Consult with a financial advisor who understands business needs before committing to permanent insurance.

The Evoro Advantage for Business Owners

Evoro serves the needs of small business owners with:

Higher coverage limits: Up to $5 million covers substantial personal and business needs combined.

A-rated backing: Symetra's long track record provides the stability business owners need for long-term planning.

Efficient process: The 16-18 minute average approval time respects how valuable your time is as a business owner.

24/7 support: When you have questions—about coverage, beneficiaries, or claims—real people are available around the clock.

Protecting Your Life's Work

Your business represents years of effort, risk-taking, and dedication. The right life insurance strategy ensures that work isn't lost if something happens to you.

Your family stays financially secure. Your business can continue or transition smoothly. Your partners and employees aren't left scrambling. Your legacy is protected.

Don't let all you've built be vulnerable to circumstances beyond your control. Get the coverage that protects everything you've worked for.

Frequently Asked Questions

Can my business pay for my personal life insurance?

Businesses can pay premiums for key person insurance where the business is the beneficiary. Personal insurance arrangements are more complex—consult a tax professional.

How do I determine the right amount for buy-sell funding?

Your buy-sell agreement should specify how business value is determined. Use that formula to calculate needed coverage. Review and update regularly as the business grows.

Should I have one policy or multiple policies?

Multiple policies (personal and business) can provide flexibility—you can adjust or drop business coverage if circumstances change without affecting family protection.

What if my income varies significantly year to year?

Use an average of recent years or your base sustainable income for calculations. You can always add coverage during particularly successful years.

Do I need separate coverage for each business I own?

Assess each business's specific needs separately. Some might be covered under one policy; others might need dedicated coverage.

Get your Evoro quote and start protecting your business and family today.