Whilst every business is different, every business owner should know the answer to the following questions-
- Who will run the business if something happens to me, my business partner or my key employee?
- Will they run it as well as I can?
- Will my business debts be paid off?
- If my business partners dies who will inherit their share, and can I work with them?
Remember, the person who creates the debt is responsible for the debt, and if that's you then you need to arrange debt protection for your family's and/or business partner's sake.
Cover the key person in your business
The most valuable business asset is the one that produces the most profit - your staff. Material assets can be easily replaced, staff can not.
The loss of a key staff member can have a substantial impact on profitability, operational management and the goodwill of your business. Many businesses also find there are no suitable candidates readily available within the organization and it can take substantial time and money to recruit and train an external replacement.
By covering your key person, you can help fund the loss of a valuable employee by providing an injection of cash for a revenue or capital purpose.
Establish a Will for your Business
Establish a Will for your business by creating what is known as a Buy / Sell Agreement.
A Buy / Sell Agreement is a legal contract which can facilitate the orderly transfer of a person's share in a business to the remaining owners when certain trigger events occur (such as death or serious disability).
To help fund the transfer, the agreement normally uses life insurance so that sufficient capital becomes available to buy out the departing owner's share in the business.
Keep your business running
While income protection insurance should still be considered, it's also important to protect the very thing that generates your income - your business.
By taking out business expenses insurance, you can cover certain ongoing expenses and keep your business running while you recover.
If you are self-employed or in a small partnership, business expenses insurance can help you meet 100% of your share of eligible business overheads, should you be unable to work due to illness or injury.
This can help keep your business afloat and ensure that, in the worst case scenario, there is still a business to sell should the need arise.
Expenses that can be covered with this type of insurance typically include, amongst other things, office rent and mortgage payments, equipment or vehicle leasing costs and utility bills such as electricity, heating and water.