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The success of any business is dependent on its employees more than any other asset. The death or serious illness of a key person can have serious consequences for a small to medium sized business. Such as:
A key person can be anyone from a director to an ordinary employee with special expertise. They are the ones who steer, create and drive your business. The people without whom your business would lose sales and profits or without whom even the basic viability of your business would be shaken e.g. Directors, Partners, Owners, Senior Management Staff Keyman insurance can protect you against this. Keyman insurance is a group of insurance policies designed to financially protect your business from the affects of prolonged illness or even death of staff who are central to the prosperity of your business. The insurance can't replace people but it can provide cash to buy time and cover the costs of temporary staff, recruitment, loss of profits or provide a cash injection. Asset Protection Physical assets can always be replaced or repaired, but a key person's death or disablement can result in financial loss more disastrous than any. When a key person dies, or is permanently disabled, they're lost to the business forever, which can create immediate financial problems for the business. Without the security provided by the key person, the business may be forced to sell assets to maintain cash-flow if creditors press for payment and debtors hold back payment. Customers and suppliers may not feel confident in the trading capacity of the business, and its credit rating could fall if lenders are not prepared to extend credit. Outstanding loans owed by the business to the key person may also be called up for immediate repayment. Asset Protection can provide the business with enough cash to preserve its asset base so it can repay debts, free up cash-flow and maintain its credit standing if a business owner or loan guarantor dies or is disabled. Revenue Protection A drop in revenue is often inevitable when a key person is no longer there. This could be someone in your organization who generates significant revenue for the business. Losses may also result:
Revenue protection can provide your business with enough money to compensate for the loss of revenue and associated replacement costs to replace a key employee or business owner should they die or become disabled. Ownership Protection (Business Succession) This is particularly important to business owners where the death of an owner can result in the failure of an otherwise viable business simply because of the lack of business succession planning. While the owners are alive, they can negotiate a buy-out amongst themselves, e.g. on an owner's retirement. But what if one of them dies, the remaining owners must negotiate with the deceased owner's family, who may well be more concerned about the needs of the estate rather than the needs of the business. Many business owners mistakenly believe that this contingency has been catered for in the business' constitutional documentation. Often there is no buy-out provision; or if there is, it's usually ineffectually drawn up and inadequately funded. Ownership protection can provide the continuing owners with sufficient cash for the transfer of equity to the continuing owners, if a business owner dies, is disabled or suffers a critical illness. It’s important to establish business insurance cover with the right structure. There are many variables to consider and we can explain the options available to you. Please call Paula or Sharon on (07) 3284 7752 to arrange a free consultation to assess your needs or to answer any queries you have.
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