While many business owners understand the importance of a comprehensive insurance program, most Australian business owners are less likely to understand that a life insurance policy is equally important.
According to a Rice Walker Actuaries estimate, the cover held by those with life insurance through their Superannuation represents only 20% of the cover needed to support their families. In fact, 60% of people with dependant children only have enough life insurance cover for less than one year if they were to pass away.
The people who work for you depend on you for business continuity and so do yours and their families. Often small business owners have much of their assets tied up in their business, and a smooth transition helps ensure that the business continues to be an asset your family can rely on.
The people who work for you depend on you for business continuity, and so does your family. Often small business owners have much of their assets tied up in their business, and a smooth transition helps ensure that the business continues to be an asset your family can rely on.
What does life insurance cover you for?
Small businesses arrange life insurance for a number of reasons. It can be used for issues ranging from ensuring the daily operations of your business if the owner dies, to buying out a director or partner’s share from their family, or to providing income to help find a replacement for a key staff member.
- Personal life insurance. A personal life insurance policy is usually held separately from policies associated with your business insurances. Personal coverage provides protection in the event of your death to help your family financially.
- Key person insurance. Business owners may take out individual policies on key staff such as partners, executives or staff who significantly affect your company profits. Policies should be owned by your business and cover the cost of replacing that staff member, as well as any potential lost revenue in their absence.
- Buy-sell agreements. Life insurance can be used to fund a buy-sell agreement, where the surviving business partners buy out the shares of a deceased partner at a previously agreed-upon price. The life insurance policy covers that agreed cost and is usually outlined in a contract among the owners of your business.
How to choose the right life insurance policy
You can choose from a wide array of life insurance products dependant on your company’s specific needs and size.
Much like business insurance, different policies have different covers and benefits so it is important to seek advice from a professional who can work with you to advise on the right life insurance option for you.
PSC Connect works with life insurance specialists who can advise you on what life insurance options will work for you. Contact us if you would like to know more.
Conditions apply for each policy and the information expected from you for a policy to trigger. Coverage may differ based on specific clauses in individual policies. Please ask your broker to explain the additional benefits and exclusions pertaining to your policy.
The information provided is general advice only and does not take account of your personal circumstances or needs. Please refer to our financial services guide which contains details of our services and how we are remunerated.