Think HBR

Insuring your most valuable business assets

John Manuel
Prosperity Advisers Group
For many businesses, your most important asset is not the obvious physical assets but the key person or persons, and this includes you. Whether you are a major corporation or an SME you will have good people in critical positions that are key to your ongoing success. Just as it’s wise to insure business assets against loss, it’s good risk management to insure specialist or skilled people who create business profitability.
A key person is someone who provides the ideas, drive, initiative and skills that generate the profits needed for the survival and growth of the business. They could include:
• A managing director or CEO who provides strong leadership
• A sales/marketing manager whose unique contacts or business methods give the business a competitive edge
• A highly skilled specialist, who is largely responsible for attracting and keeping customers
• A finance manager who is a very astute ‘money manager’, the financial brains of the business and the reason for the corporate entity’s good credit standing
If one of those key people is affected by a serious illness or even an untimely death, your business may need to think about, finding and integrating a suitable replacement, replacing profits, extra costs to hold market share, additional resources to meet contractual commitments, and maintaining customer and supplier confidence.
Insuring against Key Person risk means that your business will receive a lump sum payment to stabilise the business and help you make the necessary changes to recover from their loss.
It is the business that owns the policies and pays the premiums, and the business receives the proceeds if something happens to the key person.
After you’ve covered your businesses risks, it’s then wise to consider your own personal risks. Working in a professional occupation brings a number of career and lifestyle opportunities. But are you doing everything you can to protect what you’re building towards? As your life, family circumstances and career changes, you need an insurance plan that changes with you. So if you’ve never had a personal assessment of your personal insurances, or you had one quite some time ago, now may be a good time to give your insurances a boost.
Insurance inside super, for example, may not be providing you with the adequate cover you need to be financially secure. Did you know that you (or the beneficiary) may need to pay tax on certain types of insurances when they are held inside superannuation? There are a number of other cover types available outside super to give you more flexible, comprehensive protection. Personal insurances could even reduce your tax bill.
The best way to find out the types and amount of cover you need is to speak to a financial adviser. They can help you get the right cover, and make sure it’s structured in a way that makes it as cost-effective as possible.
For further information call Prosperity Advisers on (02) 4907 7222, email or visit