Business & Personal Insurance – Why is it so underrated?
Article written by Silvio Marinelli, Partner & Financial Planner, Highview Accounting & Financial.
As business owners, if we are travelling successfully, we invariably like to go out and buy a nice new car, something special to reward our hard work, and we might spend $50K. The first thing we do alongside this purchase is take out insurance on the car, because we might get into an accident, right!? Sounds very reasonable and prudent behaviour.
Yet, that same person that earns the money to pay for that car often remains un-insured or under-insured, when it comes to their personal or business insurance, which sounds just plain dumb, as this is likely to be worth tens of thousands, if not hundreds of thousands more!
As business people we need to ensure we make sound business decisions and look after the things that matter long term; Family, Self and Business.
This comes in the form of many types of insurance:
1. Life Insurance – if you were to pass away, and you were the main income earner, this type of insurance pays a lump sum amount to your family so they will be looked after in the event of your death. Yet it’s as important for the spouse of the main income earner to be insured also, as how can the new main income earner still work and look after children with a big mortgage hanging over their heads.
2. Total & Permanent Disability Insurance – this type of insurance pays you if you have a serious accident or illness and you survive but can never go back to work again. As above, this is as important for both parties for the same reasons.
3. Trauma Insurance – pays you if you have a traumatic event and survive. This payment would cover medical bills, treatments, recovery etc to get you back to full health as quickly as possible.
4. Income Protection – this type of insurance pays you if you have an injury or illness 24/7. If you are a tradesman for example, and you break a leg, who will pay your mortgage or car loan if you have no income for 3 – 4 months?
Insurance is a discussion many of us avoid, and often a difficult one to have with Business Partner and/or family members. But, it should never be underrated. Could you and your family afford to not have these kinds of insurances if something terrible were to happen?
You can’t go back and change the beginning, but you can start where you are and change the ending!
EG: A young couple with 2 children at private school had the terrible misfortune of losing the young father of this family, who passed as a result of an unexpected terminal Cancer. This of course, left the family heartbroken and devastated. But, one small relief was that the father of this household was a very smart man – he had the correct insurances and investments in place for his family’s future. Adequate insurance cover meant that his family could stay in the same house they currently lived in without a mortgage, they had enough money to keep the 2 children in private school and the Mum only had to keep working part time as she had already been to maintain their standard of living. This is an excellent case of planning for the future, which is unknown. Life can throw hurdles at us but having plans in place can help. Imagine the scenario if the planning wasn’t in place?