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What will happen to your business if you get seriously ill?

A survey[1] of the opinions of Australians aged 25 to 65 and found:

  • 89% said they were not likely to have an accident (making them unable to work) in the next 20 years
  • 80% said they were not likely to suffer a serious illness in the next 20 years
  • 83% did not expect to pass away in the next 20 years

National statistics show that most of these sufferers of the ‘It will never happen to me’ and ‘She’ll be right, mate’ syndromes will experience an insurable event in their lives. More than three in four Australians will be diagnosed with a serious illness in their working life.

This is a real problem considering that Australia is one of the most underinsured nations in the developed world.

What about your business?

Tragically, many small business owners who cannot work due to unexpected injury or illness can’t afford the cost of living and find themselves having to the sell their business.

What can you do?

In addition to a succession plan and exit strategy, the most important security precaution for every small business owner is income protection.

Income protection can replace up to 75% of your salary if you are unable to work due to unexpected illness or injury.

Make sure your insurance broker factors in the special circumstances of a small business or being self-employed:

  • Self-employed people may have business partners, guarantors on business loans as well as the standard mortgage and dependants.
  • Many self-employed people do not have super or if they do their fund may not provide insurance.
  • Your income may be determined by the profitability of your business at any given time, and it may come from multiple sources or even act as savings for your business.

How to save money:

  • If you are self-employed and using insurance for business purposes, in some circumstances your premiums can be tax-deductible, for example, if you purchase the policy through your DIY super fund.
  • Over-the-counter-insurance with from a bank often results in you being under or over insured with lots of wasted money. This is because they are limited to the types of policies and sums insured that they can quote on. They are also providing advice on only one company’s product so are not independent and cannot compare products.
  • If your broker has many years experience they will understand a company’s claims attitude to know which companies are more compassionate towards existing illnesses and other issues.
  • The price of insurance policies is set by the insurance company and cannot be negotiated. However while there is no room for negotiation a good broker can shop around and tailor insurance policies that factor in you, your lifestyle, any dependents including your business. The savings can often significant and ensure you don’t [pay anymore than you need to.

How is your business protected against the unexpected?

[1] The ING Research Optimistic Australians report (December 2008)

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Rick Mapperson

Rick Mapperson

Rick Mapperson is the founder and managing director of Rick Mapperson and Associates ( http://sydneyinsurancebroker.com.au/), a personal insurance brokerage. Rick has been insuring people, particularly small business owners, for twenty years. Rick combines his skills as a licensed Financial Planner and his understanding as the co-founder of an Australian charity focused on families, to understand the best interests of his clients. You can follow Rick on twitter @RickMapperson

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