Business owners, more than anyone, understand the importance of identifying risks and taking steps to mitigate them. Insurance is just that, a risk mitigation tool that financial advisers leverage to help mitigate the risks in your world. Understanding the size and types of these risks informs which types and how much coverage you may require. Curo is here to provide comprehensive insurance advice for business owners.
Often, a business owner is fundamental to the success and operation of their business. While that may seem ideal, it can cause a huge financial problem should something happen to the owner. Not having the right risk mitigation strategy in place could be catastrophic.
This article will share how a business owner can use life insurance to keep the business operational even in challenging times.
Common Financial Risks of Business Owners
While it is naturally critical to assess risk from the perspective of a business, it is also crucial to include the personal risks of a business owner in this analysis as they are intrinsically linked. Below are some of the financial risks a business owner may face:
Personal financial risks
Being sick or injured can prevent a business owner from working on and in their business. This can heavily impact the profitability of the business and income for the family.
- Loss of income: For most small business owners, their business is their income. A sustained period where an owner is unable to work may have a catastrophic impact on their business and, therefore, their livelihood.
- Personal debts: Debts such as mortgages and loans need to be serviced, placing a significant strain on cash flows, given your absence.
Business continuity risks
The profitability and stability of a business are generally tied to its owners and key persons. Failing to consider what your business may look like could have a catastrophic impact on its financial stability should a partner or key person need to exit prematurely due to death or disability.
- Loss of the key person: A key person in the company can be the business owner, a high-level executive, or a partner. Losing them will have a massive impact on business continuity.
- Succession plan: Another financial risk for any business is not having a succession plan in case of the owner or a partner’s untimely passing. This can cause conflicts within the business on how to take over the shares of the deceased partner or how the business can continue its operation.
Operations-related risks
Other two financial risks in a business are:
- Startup expenses: During the startup phase of the business, the expenses could be greater than profit. If a business fails to prepare for a longer financial runway, it could easily be put out of business before making any profits.
- Employee retention: Fast turnover of employees has a negative impact on the business as it can make the profits unstable.
Types of Life Insurance Policies Available For Business Owners
Many business owners have multiple life insurance policies for risk mitigation. Understanding these options will help you get the right coverage.
Life Insurance (death coverage) for Business Owners
It pays a lump sum in case of premature death or a diagnosis of a terminal illness. This policy can provide the following:
- Additional financial support to the family to continue with their lifestyle
- Additional funding to the business to continue its operations or expansion
- Source of funds to settle the estate taxes
Income Protection Insurance for Business Owners
This provides up to 70% of pre-disability monthly income to the owner who becomes unable to work for an extended period due to sickness or injury.
This is beneficial to business owners who are dependent on the salary they get from their business. It can cover their monthly expenses during their treatment or recovery.
Total and Permanent Disability (TPD) Insurance for Business Owners
Depending on the definition of the policy, this provides a lump sum payment in case the owner becomes unable to work permanently. The payout can be used to cover the following:
- Medical expenses
- Home medical renovations
- Medical care
Trauma Insurance for Business Owners
If the business owner suffers from health issues such as cancer, heart attack, or stroke, this policy provides a lump sum benefit.
Trauma insurance can support your recovery without the need to touch your savings or put your business in jeopardy.
Key Person or Keyman Insurance for Business Owners
The business owner, a partner, or an employee can be a key person in the business. Losing them can derail the profitability and stability of the business. To ensure business continuity, key person insurance pays lump sum benefit to the business in case of untimely passing or being permanently disabled of a key person within the company.
The payout can be used for employee replacement, additional fund for operations, emergency fund, or others.
Buy/Sell Insurance for Business Owners
As a business owner, make sure that you have continuity plans when you suddenly lose a partner due to premature death or health issues. Typically, businesses take out Buy/sell insurance to have access to additional funds to purchase the shares of the deceased partner.
Business Expense Insurance for Business Owners
This policy can support up to 100% of the business’ fixed costs should the owner become totally and permanently disabled.
Group Income Protection and Life Insurance for Business Owners
Group income protection and life insurance coverage are the common employee retention programs for employees.
While these policies are not aimed at protecting the business owner, this will let the employees feel valued as part of your team.
Why contact a Curo Financial Expert today?
Our team at Curo Financial has industry expertise and decades of experience in providing various insurance advice to business owners. From protecting your family’s fortune to providing a financial safety net for your business, our team will work with you to cover your needs.
Our Expert Financial Advisors Are Here For You
Our team of advisers has helped hundreds of business owners create financial solutions that protect their personal and business finances so they can focus on working on their business. Want to know how we can help you? Get in touch with us here and one of our experts will reach out to you.
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Working with us means getting expert and customised insurance advice to meet your goals. As your advisor, we aim to be a trusted source of financial advice whether you are securing your family’s future or the continuity of your business.
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Frequently Asked Questions
Can you help small business owners?
Yes. At Curo Financial, we work with small to large business owners to provide insurance advice.
How can business owners benefit from insurance policies?
There are personal and business-related insurance policies that provide financial support to the business owner or the business in challenging times. You may refer to the article above to know more about the types of insurance policies.
How do I protect myself as a business owner?
Business owners can take advantage of various insurance solutions such as income protection, keyman insurance, and TPD insurance to protect not just their personal assets but their business as well.
How to plan for business succession in Australia?
Business succession needs to have a thorough consultation with an expert. Our team at Curo Financial can help you strategize your succession, your tax planning, and estate planning.
Is it expensive to hire a financial advisor?
Not at all! Hiring a financial advisor can save you from a headache and costly mistakes by setting up your own personal financial plan and strategies. Having a financial advisor can build you more wealth by providing financial advice and tailored solutions to your needs.
