Protecting what you’ve built
Building your business never stops. Protecting what you’ve built so far is equally important. As businesses grow, it’s vital to ensure all that hard work isn’t lost in an instant.
Protecting your business from disruption owing to injury or illness
The right insurance can help protect your business against the loss of key personnel and the revenue they generate. It’s normal for a business to rely on several key people who they’d find it difficult to operate without. Ask yourself:
- Who are your key people? What is their value to the business in revenue?
- Could you quickly and easily replace the revenue that a key person generates? Would the business stay afloat?
- Could your remaining staff take on the additional workload? Would they stay with the business with the extra workload and pressure?
Business continuity cover can provide a monthly benefit payment to help keep your business running should you or any key staff become disabled because of illness or an accident.
Meeting loan repayments
Most businesses protect their physical assets such as their equipment, plant, stock, and buildings. Often overlooked is the human side, which provides the skill, initiative, drive, specialist knowledge, and ingenuity to make the business a success.
Often, your ability to repay any debt is dependent on key people. If a key person dies (such as a top salesperson) or is unable to work, your business may have difficulty meeting its loan commitments. Additionally, lending institutions may need to rely on personal guarantees and supporting security. Ask yourself:
- If something happened to a key person, would your business have any difficulty meeting commitments under a loan arrangement?
- What would become of any assets associated with the loan? Would they be sold to repay the debt?
- Do you, or any other directors, have any personal assets (such as your home) linked to the business loan?
To protect yourself from risks associated with business debt, insurance is available to:
- Protect the guarantor and their assets. Proceeds can be used to repay the loan in part or in full and release the guarantor.
- Protect the business and the remaining business owners. Often banks make shareholders or directors personally responsible for the whole debt.
- Reduce the risk of company or personal insolvency.
- Meet obligations under the law.
- Reduce the risk of losing personal wealth.
Protecting your business if something happens to a shareholder or business partner
The person may not even be someone you know or trust, and could have no knowledge of your business, or no interest in it! But because they now own a share in your business, they would have just as much say as your fellow shareholder before they died.
- Could your business continue if one of your partners were to die, suffer a critical illness, or be disabled and unable to work?
- What if one of your business partners were to become critically ill or die?
- Would you be forced to work with someone else?
- Who would control your business?
- Could you work with a new, possibly unknown, person if they inherited a shareholding? – would they want a say running the business?
- Do you and your partners or fellow shareholders have the funds to buy out your partner or their estate?
To solve the potential issues mentioned above, typically, a robust buy-sell agreement is best to be supported by insurance to an agreed value on each business owners interest, as determined by an annual valuation. For example, if a business is equally owned by two owners and is valued at $300,000, the sum insured on the life of each business owner may be recommended to be $150,000. Annual reviews will ensure the sums always reflect the market value of the business. Of course, it’s best to confirm this with an adviser.
As we’re not an insurance provider and aren’t owned by one (unlike some financial advice firms) our team of Authorised Financial Advisers can access all the best insurance providers across the country to ensure your business’s needs are met with the right level of cover to suit your developing needs. So that you know our advisers (in this instance often referred to as an insurance broker) are truly putting your interests first, our advisers are all paid a salary instead of commission. They also have no incentive to promote one product over another.
To explore your options have a free consultation – what have you got to lose by checking your situation? For a free, no-obligation chat with an adviser (insurance broker), call 0508 MILESTONE (0508 645 378) or leave your details below.