The SMEs (small to medium enterprises) that form the backbone of New Zealand’s economy, are often so reliant on a small number of people that health events in their lives can seriously affect the business, or even make it go under.
Fortunately, insurances are available to mitigate that financial risk: owner’s risk insurance, key person insurance, debt protection insurance, business revenue insurance and group insurance cover.
Owner’s Risk Insurance protects businesses when a shareholder dies. It releases funds in the event of a shareholder’s death, so the other shareholders can pay out the deceased’s estate and take full ownership of the business. This protects the remaining shareholders from the risk that their former partner’s relatives may want to withdraw from the business, or steer it in an unwanted direction. Even when there is only one shareholder, owner’s risk insurance could provide for succession within the business.
Key Person Insurance maintains the value of the business when a key person dies, suffers trauma or becomes disabled. This could be an owner, or senior employee whose contribution to the business is vital. The proceeds of the policy is paid to the business to help negotiate the difficult period and employ someone with the same expertise and experience to take over,the loss of the key person would be covered this way.
Debt Protection Insurance can also be taken on the life of a key person in the business, but here the focus is on providing immediate relief from debt.
Business Revenue Insurance This cover pays a monthly amount for a year from months 2-11. This amount in dollar value is what you bring into the business on a monthly basis, so if you are not there to bring the money in we need to cover the amount eg $20,000 or $30,000 per month.
Group Insurance Cover are medical and life insurances that can be made available to employee groups at reduced rates.