As your business grows, you should consider insuring the people who play a key role in the ongoing success and profitability of your business.
What are the benefits?
If something was to happen to you or another key person (such as a key employee 1), and the insurance provider pays to the claim, the insurance payment could be used to:
- offset a reduction in revenue, and
- cover the costs associated with finding and training a suitable replacement.
How does the strategy work?
Many growing and established businesses still depend heavily on the skills and intellectual property provided by the owners and other key people.
Where this is the case, the temporary or permanent loss of a key person could have a detrimental impact on revenue and profits.
Also, if another suitable person isn’t available within the business, considerable costs can be incurred recruiting and training a replacement.
A cost-effective solution is to insure the key people in your business in the event of death, total and permanent disability and critical illness.
If any of these events should occur, the insurance payment can provide a much needed injection of cash to stabilize and protect the business.
While it may be possible to absorb the reduction in revenue into your business’ current year profits, or accumulate a reserve, insuring the key people in your business could be a less expensive and more convenient alternative.
Note: This strategy is usually less important for businesses with limited or erratic revenue sources, as well as those that are less reliant on the contribution of key people.
1. For the purpose of this strategy, a key employee could include, for example, a company director, sales manager, financial controller, or IT manager or developer.
If you need more information or help to implement this strategy for your wealth protection,
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