Many small business owners are happy to pay the hefty monthly insurance premiums for the peace of mind that their equipment and premises will be safe. However, they often neglect their most important assets which is themselves. In this article, we will attempt to have a look at some of the reasons that you as a small business owner should take out income insurance to protect your small business and yourself, as well as introducing some of the options that are available to you to get access to this protection.
Protect your family against sickness and injury
When you were working for a company and earning a full-time wage you get access to sick leave that you can use if unexpected illness strikes and some sort of workers compensation scheme to protect you if you got injured in the workplace. Conversely, as a small business owner you are self-employed and this means particularly in the case of illness that you may not always be covered. If you were to imagine the drastic impact on you and your family if you are unable to work for an extended period, likely you would be required to draw down on your savings to sustain yourself. This applies even if you were to forego some of life’s little luxuries such as pay television.
This concern is of particular importance if your small business operates in the consulting field as opposed to producing goods for sale. The reason I have chosen to highlight this is that in the consulting field you are the face of your business, and people are paying to you to help with solving the problems. Without you there is no business and therefore cannot be any income. It is possible for a business producing a good for sale to survive at least through period without you being directly involved.
Insurance payments can cover your replacements
For the sake of argument, if you are the managing director of your company, and your company sold tyres, and you are and not able to work for six months due to a serious illness. Depending on the type of cover that you take out, you may arrange for your insurance payments to be made directly to a temporary employee to undertake your duties in your absence, and not to you directly. This option is extremely valuable as there are two sides or effects of you not being able to carry out your normal duties. The first, outlined above and deals with making sure that your family and you are able to meet all of your personal obligations. The second and less considered side of the coin in is of equal importance. This second side is your obligation to support your businesses place in the marketplace. The insurance money may even in effect be less valuable to you even though it supports you and your family if when you are eventually able to return to work on your business has decreased to 50% of its original size.
What options are available to you as a small business owner?
I will need to put a disclaimer in this year and say that each provider is likely to have different options available, and you should really consult your financial adviser before making any decision about income insurance. However, below are some of the points that you should consider their relevance to you when deciding about income insurance:
1) Replacement of 75% of your income
2) tax-deductible premiums
3) coverage of $100,000 death coverage
4) rehabilitation support covering your medical bills for 12 months
5) meat supplier and business overhead obligations
6) employee wage supplements
With all factors considered, it seems to make sense to seriously consider taking out an income protection plan for both new and small business. I also understand, that in any growing business funds are at a premium, this means that in some cases, you will be willing to take the risk over the short-term. As a business becomes more and more established and profitable it shouldn’t be something that you forget and is a viable option is not anything more than peace of mind and a good nights sleep.
What are your thoughts? Do you have this sort of coverage for yourself?