Business insurance: Tips and strategies
Devising a strategy to protect your business.
When planning a strategy to protect your business, consider:
- Who are the key people in your business, that if they are to be ill, injured, or pass away, your company will suffer?
- Which assets or revenue stream that are essential to the company?
- What sort of business debts that your business have accrued
- The possibility of a liability in the future to do with clients or customers
The need to protect yourself and what is yours is an inbuilt need. It is already embedded in the subconscious to protect your loved ones and your property. As a business owner, the desire to protect your business might be just as strong, especially if it is your bread and butter. You just can’t afford to lose something that proves to be a big asset. So, how can you protect your business?
There are many methods and avenues which can protect your business from such unfortunate events. However, the problem may arise if the method is not complementary to what your business needs.
In order to devise a strategy that would really work, you have to consider your employees, the debts your business has, insurance you need if accidents or death happen, and other avenues where you can save through tax cuts.
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Determining Your Insurance Needs
You, as the business owner, know what coverage is enough for your business because you know what your costs and obligations are. The insurance policy you choose will make the difference between security against unforeseen losses and paying such losses out of your own pocket. If you don’t think that the premium you will be paying outweighs the losses and risks you are facing, then you might not want getting yourself insured. However, you must also bear in mind that such losses, if unprepared, can have catastrophic results.
You must not only consider the amount of insurance you want to have, but also what is insured if there is such a loss. To gauge the insurance with the possible loss, there are five key factors that are usually the basis of all insurance claims.
- The Person – Is the person involved in the injury included in the policy?
- The Property – Is the property you are making a claim with included in the list of properties declared?
- The Peril – Is the cause of loss covered in the policy?
- The Exclusions – Is the cause of the loss excluded in the policy?
- Conditions – Does the cause of loss or accident meet the conditions or under any limitations under the policy?
Each question must be brought to consideration when determining what type of insurance you want to carry. Then, you can make an inventory of the things for which you want protection from loss.
With this knowledge in mind, you can then ask a financial adviser for insurance that fits your needs and budget. You can also ask him what strategy is needed so you can get the most out of your insurance.
What Is the Right Insurance for Your Business?
When you talk about insurance for your business, it would prove to be a rather broad topic as no two businesses are the same. But no matter what policy there is in the market, it all boils down to one thing – protecting your business against risks.
So before getting a policy, you have to look at the different risks your business might encounter in the future. Basically, business insurance can be grouped into three divisions or category.
- Assets and Revenue Insurance: This includes protection for the machinery and equipment used in your business, your business premises and its contents, employee dishonesty, and loss due to business interruption.
- People Insurance: This type of insurance, as the name suggests, provides protection for your employees and you. It includes workers’ compensation, personal illness and injury, and superannuation.
- Liability Insurance: This protects you for any negligence or damage done to a client or customer. This includes public liability, and product liability. Note: This policy does not cover professional indemnity.
Insurance for Your Employees
Getting your employees covered could be more of a profit for you than a loss. When employees know that you have them covered, it can increase their morale, which in turn, increases efficiency and productivity.
Just like business insurance, employee insurance provides adequate protection for your employees. OnePath offers group life insurance which is subdivided into three categories to give business owners more flexibility to choose which type of protection their employees need.
Group Life Insurance: This type of insurance policy is ideal for businesses which have at least 75 employees working in it, and those who have corporate and industry super funds. Getting your employees under this policy attracts the best and retains the right people in your business. Under OnePath, this type of insurance is further grouped into three specific sub-categories or products.
- Group Life Insurance pays a lump sum if your employee dies or is diagnosed with a terminal illness.
- Group Salary Continuance pays a monthly benefit of up to 75% to an employee who is unable to work because of an illness or injury.
- Group TPD pays a lump sum to an employee who has been totally or permanently disabled.
Protecting Your Employees
It is a fact that the biggest asset of a company or an organisation is its people. No matter how small or big the company is, or how brilliant the marketing strategy is without your employees’ contribution, all will just come to naught. That is why if you are thinking which among your business components need protection first it’s none other than the people who work for you.
The first step in getting protection for your key people is to get group life insurance for them. Not only are your employees protected, but you gain more from that. How?
- Increases the morale of your employees
- Increases efficiency and productivity
- Lessens absenteeism
- Increased productivity means increased profits
- You gain the trust and respect of your employees
Aside from the above mentioned benefits, having insurance for your employees will lessen the financial burden you will have should an employee sustain an injury, disability, or death.
Get Protection for Your Business Debts
It cannot be avoided to have debts when you have a business. Business or bank loans you have made to help expand or improve your business are necessary. However, an unlikely event, such as death, illness, or injury, can have catastrophic impact on your business if you have outstanding debts. In order to make your business remain viable, you need to take out life insurance to cover your mortgage and personal debts.
Getting protection for your assets insulates your business from claims of creditors without concealment or tax evasion. It also frees up your cash flow and maintains your business’ credit standing in the event of death or disability.
Covering Your Business Expenses
Death and disability brings you many life altering changes. Attempting to deal with these changes while taking care of your business might prove to be a very demanding task. However, if you have Business Expenses Insurance to cover the fixed costs of your business, that would be one less burden for you.
Business Expenses Insurance covers the fixed costs of a business, like the monthly rent and utilities bills, for a maximum of up to 12 months to ensure that the business will continue even if you have been seriously injured or are seriously ill.
Business Expenses Insurance, also called Business Overheads Insurance, is beneficial not only to business owners, but to self-employed people who play a major role in a business or a company.
Funding Buy-Sell Agreements with Life Insurance
Buy-sell agreements among co-owners or present and future owners of a closely-held business are intended to ensure the smooth future transition of its ownership. They provide the mechanism, and, if properly funded, the means, to effect a change in control and a transfer of interests upon the occurrence of a number of events, beginning with death, disability and retirement.
One way to fund such agreements is through life insurance. You can do this by letting the business take out life insurance for each of you, where the sums insured are concurrent to half the value of the business. If one of the partners dies, the full proceeds of the benefit are paid out to the beneficiaries of the deceased. This cashes out half of the business. Full ownership is then given to the surviving partner saving them from looking for a large amount of money on such short notice.
Take Advantage of Tax Cuts through Superannuation
Another component where superannuation can be proven as tax effective is through insurance. There is a huge difference in taxes if a life insurance premium is funded by the superannuation. Insurance that is funded within the superannuation is based on the age limits which are annually indexed.
- Less than 35 – The annual limit under this age bracket is $13,934
- 35-49 – Annual limit is at $38,704
- Over 50 – The annual limit of those who are over 50 years old is $95,980
The above limits are applicable to employers making a contribution, and those who are self-employed. Insurance premiums are included in these overall limits, which means that no other deductible contributions will be accepted to fund the insurance premiums. However, insurance premiums can still be funded using non-deductible contributions.
Evaluating what you and your business’ needs are would make it easier for you to devise a plan for how to protect your business and its assets. Keeping the right perspective and having the right tools will save you headaches in the future.
Finding Affordable Business Insurance Coverage
To obtain affordable business insurance that meets your needs and suits your budget, there are a few simple tips to follow:
- Evaluate your needs: This is the first step when looking for an insurance cover. Identifying your needs narrows down the choices you have instead of just going around aimlessly. And since there are different types of business insurance, being able to pinpoint what you really need in the first place saves you a lot of time in doing your legwork.
- Get multiple quotes: You can do this in various ways. The easiest is by going to insurance comparison websites where you can get instant quotes after answering a few questions. Another way of getting a quote is by calling the insurance company hotline or visiting one of their offices near you, or you can ask the help of an insurance broker.
- Compare policies: When you get quotes, be sure to find out more information on the exclusions and inclusions of each policy. This will let you see whether the cost is concurrent with the features. Choose a policy that can do a lot of things for you in the future.
- Ask questions: When shopping for business insurance, it is normal when you come across certain information that might confuse you. Do not hesitate to ask your insurance broker or the company from where you are getting the quote. It is better to clarify and understand things on the onset so that you have full knowledge of what you are going into than regret it later.
- Talk to an expert: An insurance broker with an extensive experience and portfolio can save you time and money. Seek a broker who has various insurance companies in his portfolio so that you have more options.
- Negotiate: Whether you ask the help of an insurance broker or doing the shopping alone, negotiating for the best deals in terms of price and feature will lead you to a cheap insurance policy that gives you ample cover. Do not be afraid to haggle and see how far the negotiation can go in order to get a good deal. Besides, there are more than one insurance company who will be happy to give you a discount to gain one more client in their roster.
Choosing a Business Insurance Provider
Your business will either benefit or get hurt from the kind of business insurance you will get, and by the insurance company you will choose to strike a deal with. Therefore, both the policy and the company are important when you make a claim in the future. Here are some guidelines when choosing an insurance company.
- Look at their claims history: It is essential to look into the history of an insurance company and their claims history. The number of claims the company have paid says more than a hundred advertisements to the dedication and commitment they have to their clients.
- Read the reviews: Reviews are where you can get comments and criticisms from other clients who have experience dealing with the insurance company. You can have access about these reviews online through forums and review sites.
- Look at their financial stability: A company's financial stability plays an important role when it comes to claim time. You can read about these companies in the finance section of your newspaper, or access financial reports about them online. It might be extra work for you to look into this information but the long term benefit it can give you is priceless.
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