Wealth Strategy Part 3 – ‘Protecting your Assets’;
If you’ve used debt to start-up or grow your business, you should ensure you and other key people have suitable insurance cover is the best way of protecting your assets.
💡 What are the benefits of protecting your assets?
If something happens to you or another key person and the insurance provider pays the claim, the insurance payment could be used to;
- Reduce or repay debts
- Protect any personal or business assets used as loan security.
How does the protecting your assets strategy work?
Most businesses use debt to startup and grow their operations such as;
- Loans sourced from a lending institution (eg a bank) that are secured by personal assets (such as the family home) or business assets (such as business real property)
- Proprietor loan accounts
- Unsecured loans provided by a relative (eg spouse or a parent) or an associated entity (such as family trust or company)
- Significant trade creditors
Protecting your assets
Are you covered?
While few businesses could exist without entering into these types arrangements, problems can arise if you (or another key person) are lost to the business temporarily or permanently.
⚠️ By NOT protecting your assets..
Your business could therefore have difficulty meeting loan commitments. The lender could also have concerns regarding the business’s cashflow and credit position and may require the outstanding loan to be repaid immediately.
- You may even have to sell the personal or business assets used as security so the debts can be cleared.
💡 One way to reduce these risks is to insure yourself and other key people in the event of death, total permanent disability and critical illness.
💪 Why protecting your assets can save you
If any of these events should occur , the lump sum insurance payment can be used to;
- Reduce or pay off debts
- Release any loan guarantee or security provided.
- Protect your personal and business assets, and
- Ensure the business can continue as a viable operation.
Note: This strategy is particularly important for highly geared businesses.
- For the purpose of this strategy, a key person must have an interest in the debt and will usually be an owner, loan guarantor or third party who has lent money to the business.
- Proprietor loan accounts generally arise when a shareholder or director of a company lends money to the business.
Protecting your income is another wat of protecting your assets.
By using the strategy of protecting your income you could:
- Receive up to 75% of your pre-tax income if you are unable to work due to illness or injury, and
- Ensure that business resources do not have to be used to fund you while you are unable to contribute to the business due to illness or injury.
If you need more information on a best wealth protection strategy for you, or help to implement protecting your income and protecting your assets, contact us today.
Call us on 08 7111 0022 or book a chat here. A simple call may be all it takes to get you covered.
Arthur Panagis
Author, Founder, Wealth Coach and Financial Strategist
B.Bus (Accountant)
Grad Dip (Financial Planning)
Professional Certificate in Self Managed Super Funds
ASX Listed Equities Accreditation
Tax (financial) Advisor
– Head Office –
Suite 2, 148 Greehill Rd,
PARKSIDE SA 5063
Ph – 08 7111 0022
Email – info@fmgws.com.au
REMEMBER, action is power!
We want to make the rest of your life the best of your life.
<= SHARE THIS STORY
Disclaimer: This article is factual information only. It is not intended to imply any recommendation about any financial product(s) or to constitute tax advice. The information in the article is reliable at the time of distribution, but may not be complete or accurate in the future.
