Business Overheads
Many small business owners do not adequately plan for the possibility of becoming disabled and unable to work due to illness or injury. This impacts their ability to pay the regular, fixed operating expenses of running the business and keep the business viable whilst they are away.
Business overheads is a form of income protection that helps pay for your business expenses if you can’t work due to sickness or injury.
Key Person Insurance
An employer or business may take out an insurance policy on the life or the health of your employees whose work, knowledge, or contribution is considered to be uniquely beneficial to the company. The employer or business does this to offset the costs such as recruiting and training of a successor and the losses that are incurred as the result of the death or permanent disablement of a key person within their organisation.
In the case of loss of a valuable employee, key person insurance will compensate you with a fixed monetary sum, which is stated in your insurance policy.
- When you lose a key staff for an extended period of time, key person insurance can provide you with monetary compensation for the hiring of temporary personnel or, if necessary, for the recruitment and training of replacements.
- Key person insurance can protect your profits. This means that you will be compensated when you lose income due to the absence of a key person. (e.g.: When a business project involving the key person is canceled, or when the loss of the key person amounts to lost sales and income.)
- Key person insurance also covers instances wherein you lose a person involved in guaranteeing banking facilities or business loans.
- Partnership interests or shareholders may also be protected by key person insurance. Usually, this insurance will allow other existing partners or shareholders to purchase the shareholdings
Buy Sell
Businesses generally depend on a few people to produce the profits, provide the capital or manage the business.
For a business owned in partnership, consideration needs to be made as to how the remaining partners would be able to fund the purchase of another partner’s share of the business, in the event of death or total and permanent disablement.
A Buy/Sell agreement is a contract between the owners of a business, to sell their shares to one another in the event of death or permanent disablement. Insurance provides a practical and efficient solution to assist in the transfer of the business interest in such instance.
This strategy will ensure the remaining principals can continue with the operation and control of a debt free business.