DON’T let your good intention to be financially independent end up being a huge debt burden on your loved ones.
It often happens that self-employed people neglect to take enough life cover, if any, leaving lots of debt when they pass away.
Lee Bromfield, CEO of FNB Life, says many people forget that their dependents still need an income once they pass on.
“Even if you had life cover before starting out, it may still not be enough to cover both the financial needs of your family and business related expenses,” he said.
If you are a sole trader and married in community of property, the surviving spouse would be left to deal with estate administration costs, debt obligations, legal fees and cash flow issues while deciding the fate of the business, among other expenses.
Life cover is necessary because:
- Loss of income or profits: If the family want to keep the business going, there may be expenses while looking for a successor.
- Business expenses: life cover can help take care of business expenses such as rent, consultants, contractors, suppliers, taxes and broader operating expenses.
- Business loan: in the event that the business owner had to raise capital to start the business or acquire operating assets, the estate may be held liable.
- Forced liquidation: should the family be forced to sell the business and its assets to cover its debt, any outstanding amount can be covered through life insurance.
