Seven insurance issues small-business owners should consider in 2017

Australia’s more than two million small-business owners make an enormous contribution to our communities and are the backbone of our economy. Yet, according a MetLife study* almost half (47 percent) of small-business owners are exposing themselves, their families and employees to the financial impact of illness, injury or even death through lack of insurance cover.

Here are seven things for small-business owners to consider when thinking about their insurance:

1. Protect your most important assets

These include your family, your employees and your ability to earn an income. Small business owners are notoriously hard-working and put their hearts and souls into the smooth running of their businesses. With so much on the go, it is understandable life insurance won’t always be high on a long list of priorities.

However, ABS** statistics show 5.3 per cent of Australians experience at least one work-related injury or illness within a year. This is in addition to accidents taking place outside the workplace and non-work related illnesses.

2. Understanding different types of cover

It’s important to understand the different types of cover available for both you and your employees. For instance, income protection, trauma and TPD can protect your income by providing a regular lump sum if you become sick or injured. Life insurance provides a lump sum benefit for your dependents should you pass away or become terminally ill. Key person insurance (also called key man insurance) covers against lost revenue and assets if you or a key person were to pass away, or became disabled.

3. Adapt your cover as things change

Your cover should adapt and change in line with the changes in your business and your life stage. For example, if you have just started a family, you may want to think about taking out life insurance or increasing your amount of cover. However, if your children are older, you may wish to reduce the level of cover when they leave home. Regularly assessing your situation can help reduce the chance of being under, or even over insured.

4. What’s your financial contingency plan?

Of course, every business will have a different situation but it’s crucial to have a plan mapped out should the worst happen. Our research shows many SMEs have not given much thought to how they would maintain their financial independence and protect their families if they could no longer work.

Only 16 per cent of SMEs have a financial back-up plan in place. More than half (59 per cent) expect they would have to fall back on savings, or sell assets and 35 per cent said they would have to reduce their lifestyle and spending.

5. What’s important to you?

Think about what matters to you most and use that as a starting point. Business owners need to be vigilant of changes to credit card rewards in 2017, according to research from American Express. Business owners emphasised the importance of safeguarding their lifestyle, family and business. After price, the next considerations were protection for the family, and the ability to tailor cover to suit their own needs. Convenience was also an important factor.

6. Ask around

Seeking professional advice is always a good idea when reviewing your insurance. Our research shows small-business owners consult a variety of sources for financial information. These include independent financial advisers, accountants or lawyers, brokers, internet forums, banks, friends and family. The research showed that SMEs found using a broker saved time and gave them peace of mind.

7. Find more information

There are a number of educational resources small-business owners can use to find out more about their insurance options. These include:

  • https://www.moneysmart.gov.au/insurance/life-insurance, and
  • http://www.lifewise.org.au/

* A survey of 1001 small business owners around Australia was conducted on behalf of MetLife. The survey covered every state and territory, focusing on small to medium enterprises (SMEs).

** Australian Small Business Key Statistics and Analysis, Department of Industry Innovation, Science, Research and Tertiary Education, 2012

Deanne Stewart, CEO, MetLife Australia

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