If a serious illness or accident occurs, particularly to business owners and/or the key personnel, the business may suffer a significant loss in terms of cash flow, turnover and turnaround of products and services… just to name a few. Income protection and key person insurances are critical to ensuring the survival of your business.
For most of us, our ability to earn an income and run our business is our greatest asset, so having the right protection in place is paramount.
There are three key areas to consider when choosing or reviewing your cover, which are:
1. Wait periods and benefit types
This determines how long you will need to cover yourself for before you can claim on your policy and what types of illnesses and accidents you can claim for.
2. Monthly benefit and lump sum benefit payments
Do you know the amount of lost income you’re covered for or the total amount you, your family or your business will be paid for specific illnesses, accidents or if you pass away? Make sure you are not under-insured.
For income protection, Employees can include things such as their wage, super, regular bonuses and car allowances in their income protection benefit calculations. Business owners can also include their wages and super, plus profits, company cars, depreciation and much more as part of their income protection calculations. Note: Also make sure you check if your income protection is agreed value or not. This can have significant impacts on income protection claims, especially for the self-employed.
For lump sum key person insurance benefit payments, you can include in your benefit payment calculations debt repayments, replacing lost business revenues, providing an income stream for your family and other things that are important to you if you or key personnel cannot work.
3. Policy quality
Know your policy inclusions and exclusions. You can often add benefits onto your policy for a relatively small amount of money, which can make the world of difference when needing to claim. A key consideration is also the rate at which your premiums will rise over time and if you have structured your premiums correctly to make sure they stay affordable over the long term.
Benefits of having income protection and key person insurances in place:
- Provides stability for the business and gives financial institutions confidence in the businesses ability to trade through periods when a business owner or key person is injured for a short or long period of time
- It can help to solve conflicts when death or serious illness or disability of a shareholder occurs
- It can be tax deductible if structured correctly
- Allows the business to make reactionary decisions such as replacement of personnel
- Protects income and provides certainty for business owners, income earners and their families.
Even if you are not a business owner, it is still important to make sure you have the right income protection and life insurances too.
If you want to review your current insurances policies or need help deciding on the right policy for you and your business, take the FREE insurance review, provided by our friends at BFP.
Or contact Brett Wright to discuss your needs.
If you would like to speak with 542 Partners about your business insurances,
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Please note that the information presented in this blog is general advice only and should not be taken as advice specific to your circumstances. You should consider whether the information is appropriate for your needs and where appropriate, we recommend you seek professional advice.