Why corporate life insurance should be part of an SME’s survival plan

Australia’s over two million small businesses may be the proverbial engine room of the Australian economy, accounting for 98 per cent of Australian businesses. But for many of those businesses with less than 20 staff, they’re startlingly vulnerable if even one part fails.

A 2017 BankWest study estimated sick employees cost each Australian small to medium business $20,000 per year. It’s a particularly big hit in NSW, where SMEs lose $26,536 in productivity every year due to sick leave.

It’s a fact of life that people get sick, but while most businesses won’t be crippled by the cost of employees’ annual contractual entitlement of 10 sick days, the long-term sickness or injury that can impact – even cripple a business.

Productivity of other staff often suffers straight away, as existing staff are forced to take on extra tasks – often on work they’re unfamiliar with – while a replacement for the sick employee is recruited and trained.

The replacement employee is also often very expensive, given the urgency to fill a key role at short notice, when there’s often not much time to shop around.

Throw in the jarring impact on customer or client relationships, and it’s easy to see why the “cost of long-term sickness” burden on SMEs can invade many aspects of a small business, hurting productivity and increasing costs.

Larger businesses have the ability, the necessity, to understand extensive businesses continuity planning – but what if you are the continuity plan?

No wonder financial advisers to SMEs have long called for health and life insurance products that can save a business from these potentially catastrophic costs. Yet historically small-business owners have found little help from many older, bigger insurance companies whose legacy systems and policies bog down attempts to develop new, simple products for new markets such as SMEs.

Fortunately, there are now life insurance products that combine both income and life insurance. Some products may even offer an income benefit to the employer as well as the employee.

No small business wants to ever lose staff suddenly for health reasons, but it’s a reality that if they do, it can hurt a smaller company far more than it does a business behemoth. It’s a risk that for a long time may have worried, impacted or even devastated an SME – but now they can take action to control it.

Chris Powell, Managing Director and CEO, Integrity Life

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