Does your business need life insurance?

If you are a small business owner it is paramount for you to consider every available insurance out there to ensure your business is adequately protected moving forward.

A recent study conducted by MetLife Australia revealed that insufficient insurance cover is an ongoing issue for many SMEs. One third of small business owners do not have a succession plan implemented and almost one in two believe their business would only be able to operate for up to a year if they were unable to work.

So what are some things you should consider to make sure your business is secured if and when it needs to be?

The most common types of insurance purchased for SMEs are:

Public liability insurance;
Property insurance;
Workers compensation insurance;
Automobile insurance;
Business interruption insurance;
Professional indemnity insurance
Goods in transit insurance

However, have you also considered what would happen to your business if a key employee was unable to work?

The costs of lost productivity, recruitment (if necessary), training and payroll expenses can be detrimental to the financial health of your business. If you are a sole trader, it is critical you purchase insurance to cover ongoing business expenses in case you are sick or injured.

Have you considered what you would do if a key business shareholder, for example business partner, died or suffered serious illness or injury?

Would you have sufficient cash reserves to buy out their share in the business? Selling their share in the business may be vital for the financial survival of the departing owner and their family, so if you can’t buy them out they may have to sell to someone else you don’t necessarily want to have in your business. You can prepare for this unfortunate event by allowing for it in your insurance cover. Some insurance companies offer lump sum payments to support you in the event of a business shareholder or partner departing the business.

Every SME is different so purchasing a standard, blanket insurance policy may not be serving your business in the most protective or affordable way. There is an increasing range of products available designed and tailored specifically for SME owners so you should always consider these before making a decision about protecting your business.

As with any insurance policy, being selective and knowing what cover you do and do not require is an extremely effective way to adequately insure yourself and to save money on superfluous policies.