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Self Employed
Always seek Professional Advice when taking out or adjusting your insurances
Income Protection and other things
Many things about being Self Employed are about risk taking and managing that risk within the business. Managing financial risk is one of those things which can take many forms.
In my time as an Adviser, I did meet with many Self Employed people who had no form of Income Protection in place should they suddenly become unable to work due to sickness. All had some level of ACC in place for loss of income due to accident, but statistically, people are more likely to be off work due to sickness, and sickness is more likely to result in longer term absence from work.
Some self employed people have enough funds in savings, or have set their business up in such a way that them being off work for an extended period can be handled by the business with effects on income and turnover being minimal. However most smaller business owners in New Zealand could consider the benefits of having some level of cover in place to protect themselves, their families, and their business.
With Income Protection, levels of cover can be agreed upon with the Insurance company, based on historical salaries or business income, even if those incomes do fluctuate during the year. Most income protection premiums are also a tax deductible expense. To minimise premiums, waiting periods before claiming can be longer term, even up to 2 years.
Partnership Insurance
Imagine two Partners in a business. The business is worth $1 Million. Partners each own 50%. One Partner has a serious car accident resulting in brain damage, and can never return back to work. Wife of sick partner goes to the other Partner and asks for her husbands $500,000 share of the business. Partner does not have the money and the bank will not lend the money as the business is now in a weakened state.
Possible Solution to avoid this: Each Partner takes out Life and Disability Cover (and possibly Trauma cover) on the other Partner. At claim time they (as Policy Owner) get the money, that then funds the transfer of business ownership.
Possible Solution to avoid this: Each Partner takes out Life and Disability Cover (and possibly Trauma cover) on the other Partner. At claim time they (as Policy Owner) get the money, that then funds the transfer of business ownership.
Keyperson Insurance
Key staff can be anyone from the Top Salesperson who brings in 80% of the clients, to the Office Lady who knows "everything" about the business, to the Technical Person who is internationally known, and to the Director who makes everything work. If one of them suddenly dies or becomes unable to work for a long period of time - months or a year or more - the business may suffer financially, or even fold!
Possible Solution to avoid this: Take out Keyperson cover on all such staff to inject money into the business if such an event occurs to keep the business in a healthy financial state until the keyperson can return back to work. Sometimes resulting funds can be used to pay for replacement staff if required.
Insurance for Self Employed can be complex, which is why a thorough discussion with a Registered Financial Adviser is always a good thing to do.
Possible Solution to avoid this: Take out Keyperson cover on all such staff to inject money into the business if such an event occurs to keep the business in a healthy financial state until the keyperson can return back to work. Sometimes resulting funds can be used to pay for replacement staff if required.
Insurance for Self Employed can be complex, which is why a thorough discussion with a Registered Financial Adviser is always a good thing to do.