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The Importance of the right Insurance Cover for Small Business Owners

Small businesses are the backbone of our economy, and the primary source of income for hundreds of thousands of Kiwi families.

If you’re a business owner, or thinking about taking on the challenge, you may be looking into business and or personal insurance. It’s something that can often be overlooked but as an insurance adviser, we see just how critical it is.

In this blog post, we will discuss the importance of both personal cover and business cover for small business owners and how it can protect their assets.

Protecting the family home

If you’ve secured a loan for your business using the family home as security, insurance cover is essential. If the business cannot operate due to a health condition or accident, then the family home could be at risk and seeing your business and home go in one fell swoop is the stuff of nightmares. Income protection would pay a monthly amount so the bills continue to get paid or a new person can be hired to continue working through contracts already in place.

Protecting Your Partnership with Life and Total Permanent Disability Insurance

One of the most common small business issues we see arises in a situation where there is a 50/50 partnership in a business. If one of the owners dies or is unable to work ever again, the remaining owner may have to buy out the deceased owner's shareholding from their family or from the partner who is unable to work ever again in their occupation. But where does that money come from? For many business owners, being able to stump up 50% off the business’s value at short notice is going to be impossible.

Of course, this is where insurance comes in. Life and Total Permanent Disability (TPD) insurance can provide the funds to buy out the deceased owner's shareholding, ensuring the surviving owner can keep the business running.

This is also a timely reminder that having a good shareholders' agreement or buy/sell agreement in place from the outset is essential. A well thought out plan and insurance cover can ensure that should the worst happen; closure of the business can be prevented and the family of the deceased or incapacitated owner receives fair compensation.

Protecting Your Business from Key Person Risk

Another important reason to consider business cover is to protect your business from key person risk. A key person (sometimes this person is you) is crucial to the success of the business, and their absence could lead to a significant loss of revenue or even the failure of the business. Key person insurance can provide financial support to the business in the event of the key person's death or disability, allowing the business to continue running and avoiding the need for a forced sale.

Protecting Your Income with Income Protection Insurance

For most small business owners, the income they make is tied to the success of the business. If you are unable to work due to illness or injury, your income will be affected, and you may struggle to keep up with loan repayments and other expenses. Income protection insurance can provide a regular income to cover your living expenses and help you keep up with your loan repayments until you can return to work. This can be done either as personal cover or as business cover. Speak to us to find out the best option for your situation.

As a small business owner, you have worked hard to build your business and secure your family's future. The right insurance cover can provide a safety net that protects your assets, your partnership, your business, and your income. At NZ Advice Group, we specialise in providing personalised insurance solutions that meet the unique needs of small business owners.

Contact us today to learn more about how we can help you protect your business and your family's future.