Key Person Insurance
Key Person insurance relates to Life or Total and Permanent Disability Insurance taken out on a key member of your business, under which the business is nominated as beneficiary. In the event of the insured’s death, the business will receive a lump sum payment, much like regular Term Life or TPD insurance.
As a small business owner with staff other than yourself, it is likely that the ongoing operations and success of your business depend heavily on one or more key personnel; founding partners, directors or experts in your operations without whom the venture would struggle to operate. Key personnel who intimately understand the nature and future requirements of your business can be extremely difficult to replace; often they have specialised knowledge or intellectual property, or else perform roles that influence a large part of the company. As such, the loss of a key person-whilst difficult to think about-can be a significant constraint on your business.
Key Person insurance ensures that your business (and therefore your livelihood) can survive until you can replace that key person. The amount required is dependent on your particular business: how much you would need to ensure its survival in a difficult period, and alleviate pressure on short term cash flows whilst you get the company back onto its feet. An adviser can lend a hand in ascertaining exactly how much you might require, and which particular policy would best fit your business.
Buy/Sell Insurance
A Buy/Sell agreement is a legally binding agreement between co-owners that ensures a business has adequate arrangements in place to facilitate the transfer of equity in the event of one owner’s departure due to death, disability, or traumatic illness or injury. Essentially, if you co-own a business, you want to be sure that the company will continue to run if one or more owners is unable to continue to work. Buy/Sell Agreements facilitate the transfer of a person’s ownership share by paying out a lump sum to the owner of the policy (an owner other than the life insured) in the event of death or disability so that she may assume both shares of ownership, and continue run the business.
These insurances ensure that any transfer of ownership required due to death or disability is well-funded, and that the fate of an owner’s stake in the business is predetermined should such an event occur. These agreements cover the following decisions:
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Who can buy an owner’s ownership share
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What triggers a buyout under the agreement (usually death or disability covered under the policy)
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What price will be paid for the partner’s share.
Business Expenses Insurance
Business Expense insurance provides an ongoing monthly benefit for up a period of up to one year to cover the fixed operating costs of the business if the owner is unable to work due to disability. These expenses may include rent, payable interest on debt, employee salaries and insurance premiums—the usual fixed expenses that your business incurs in the course of regular operations.
In the event of your disability, the last thing you need is to be stressed about ongoing business expenses when your health is at stake. Yet to leave your company without cash flow in your absence may result in the loss of customers, the need to take on debt, or even the forced closure of the business without a continued revenue stream. As a self-employed individual, this can potentially have dire consequences for your personal quality of life and the financial security of your family. Business expense insurance protects your personal funds and provides you with peace of mind as you recover, knowing that the fixed costs associated with your enterprise will be paid in full in your absence.
Each of these forms of insurance is usually relegated to second fiddle in the grand scheme of things, as more widely-used products such as Term Life, TPD, Trauma and Income Protection cover take centre stage in people’s minds. However, a small business owner or being self-employed, you’re exposed to unique risks regarding your income and livelihood, and the guaranteed continuation of your business. However, help is afoot. The insurance underdogs described in this article can be tailored to suit the particular risks and financial circumstances of your situation, to ensure that you’re optimally covered in the event of a number of catastrophic events.
For a full assessment of your business’ and your own insurance needs, contact our dedicated team of advisers at Curo Financial Services. As well established experts in the life insurance industry, we have spent years, casting aside products that don’t quite cut it and building strong relationships with senior officials in companies whose insurance products represent some of the best cover out there. If there’s one thing they love, it’s ensuring that you get personally tailored insurance at the best available price. Well, that and writing article after article to educate you about the exciting world that is life insurance.