It may be because we are naturally optimists, but it is remarkably common for entrepreneurs especially the young ones not to take out life insurance. In fact, according to LIMRA’s Life Insurance Barometer study, 41 percent of business owners and individuals do not have life insurance, meaning they likely do not have the necessary funds earmarked to support their business, employees and their loved ones in the event that something happens to them.

Entrepreneurs have a unique mindset and perspective that sets them apart from other professionals or even artists. Their company is born with a mission in mind, and this creates individuals who tend to be both persistent and impatient, yet disciplined. When launching a business, entrepreneurs are supported by investors, teams and their families who all share in their company’s vision, but these groups are also the most at risk should that vision be cut short by an unforeseen event. Without proper life insurance protection, the sudden death or disability of a founder could derail a company, resulting in layoffs, bankruptcy and possibly the collapse of the business itself.

There are various reasons that entrepreneurs may neglect to take out an adequate life insurance plan. Establishing protection for themselves is rarely a top priority when starting a business, as finances are stretched and owners are subject to a never-ending to-do list. The question you might want to ask is, why life insurance. Well here are some reasons why life insurance is important:

Short-term cash flow

No one likes to think about the unexpected events that could occur, such as an injury, disability or even death, to yourself or a business partner, but a good business person should anticipate all possibilities whether they are positive or negative. However, we should as entrepreneurs recognize that from the onset we are putting ourselves, our business and our family at risk if we fail to take out adequate insurance. From a business perspective, it is a smart idea to take out life insurance, which can protect your company from financial loss, liabilities or instability in the case of death. It can also assist you in maintaining your business through turbulent times, by providing short-term cash flow, keeping your operations running and suppliers happy.

Business security

Just like buying a tailored suit, a life insurance police should be a good fit, reflecting the scope and scale of your business. To that end, when purchasing life insurance, business owners need to evaluate their individual insurance needs based on a number of factors, including their level of debt, income replacement and future obligations. This is where entrepreneurs should seek help, as being unaware of vital financial measurements including the value of their business, leads to business owners receiving inadequate cover or no cover at all. What is worse, when a company is underinsured, any claims pay-outs will be insufficient to help get the business back on its feet.

Proper business evaluation

Luckily, advancements in technology now provide business owners and advisors with accurate and reliable business valuations that help to identify an adequate level of insurance coverage. Using digital valuation tools, the industry now has the means to evaluate business valuation data with actual underwritten insurance policies, historical insurance trends as well as the industry’s best practice, generating a holistic report.

Just as no entrepreneur is the same, no startup is the same. It begins with a thorough understanding of how much insurance they actually need based upon their business value and their equity stake in that business. Armed with this information, entrepreneurs can accurately incorporate vital components into their insurance plan, including buy/sell, key person, life, disability, and property and casualty, to help establish a safe and secure business.

This will also give entrepreneurs peace of mind that their business and loved ones are covered, and provide them with the satisfaction of being able to cross off one more task on that never-ending list of jobs to be done.