Over 80% of the actively trading businesses in Australia have 0-4 employees*. This means that many businesses are heavily reliant on their principal owners or key people to keep the business operating.
Most business owners are too busy to consider the ‘what if’s’, but it is important to be aware of the financial risks to your business in the event of serious illness, disability or death of a key person. Most banks will likely review their lending arrangements if a key person is removed from the business and may call in any unpaid loans. This will undoubtedly leave those left running the business with additional stress, and impact the success of the business.
- Business insurance can be complex, so it’s important to seek financial advice when putting a strategy in place to help protect your business. Some of the considerations we work through include:
- Debt protection: A lump sum cash payment to pay off business loans or personal guarantees of a principal owner in the event of their serious illness, disability or death.
- Key person protection: A lump sum cash payment to compensate for the financial loss your business may sustain in the event a key person suffers a serious illness, disability or death.
- Succession protection: A lump sum cash payment to purchase the outgoing business partners’ share in the business.
- Business expense protection: An ongoing monthly cash payment to cover the regular fixed operating costs of your business if you are totally or partially disabled as a result of a sickness or injury.
* Source: ABS Counts of Australian Businesses, June 2008-2012.