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A properly constructed insurance portfolio is vital for the stability of any small business.
Of course there are numerous insurance policies available and, as various businesses are more prone to particular risks than others, not all policies will be relevant to all businesses.
At Alliott NZ, we have an in-house insurance adviser, Gerard Gill, who can talk through the wide range of options that are available.
Most businesses, however, should consider key-person and/or income protection insurance.
Key-person insurance provides funds to your business in the event of a key person dying or becoming totally or permanently disabled.
It is taken out to cover income that will be lost until a replacement person is found and can also be used to cover any loans or commitments owing by the business.
Income protection insurance is insurance for the individual.
Many different policies are available but in most cases a policy will pay up to 75% of a person’s substantiated income through to retirement age or even until death in the event of sickness or accident.
As a business owner you should consider -
What would happen if you were unable to perform your normal duties?
What would happen if you were run over by the “proverbial bus”?
Who would take over the business?
How would the bills be paid?
Would the bank call up the loan?
How would your family survive?
These are important questions to consider and there will be other issues that are your particular situation.
For example, if you are in partnership with other people, you need to consider the implications of one partner dying and surviving family members wanting to sell out. Appropriate policies are available for this type of business structure.
As with any insurance portfolio, you need to consider the risk involved to yourself, your family or your business and cover yourself accordingly.
Permanent illness or injury or even sudden death may not be part of your business plan, but they can and do happen, and you or your family could be left seriously financially burdened unless you take prudent precautions. Key-person and income protection cover should definitely be considered as part of any small business insurance portfolio.
If you have already implemented a sound insurance portfolio, it is important to review it annually with your advisor to ensure your cover continues to be relevant and adequate.
You need to be mindful of any changes made to business operations and also take into account the current business climate.
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Directors Greg Millar CA (pp) Vanessa Williams B Com, CA (pp)
