One of the key roles of an SME owner is planning for the future and managing potential risks. Yet many small-business owners are unsure of exactly which types of insurance they need to put in place to protect their business from unexpected events.
According to a recent study by MetLife Australia, inadequate insurance cover remains a worrying issue for many SMEs. While many small business owners have thought about protecting their own income, a third do not have a succession plan in place and almost half say their business would only be able to operate for up to a year if they were unable to work.
Having the right insurances in place can mean the difference between your business staying afloat and ceasing to operate during a difficult time. Here we have outlined three things to consider when shopping for business insurance.
Protect your key people
Most business owners insure against damage to physical business assets, but for many, the most important asset remains unprotected.
Covering the most important people in your business – such as directors, executives and managers – is crucial, particularly if their inability to work could be financially devastating. The costs of hiring to fill their role, training and covering payroll expenses can quickly add up, so it is worth ensuring your insurance factors this in.
Even if you’re a sole trader, it’s important to give yourself cover. In the event you are sick or injured, appropriate insurance can cover ongoing business expenses such as vehicle and equipment leases, leaving you to focus on getting better and not on financial stress.
Prepare for a change in ownership
When it comes to business succession planning, a key question to ask is whether your business would be able to buy out a departing owner’s share if they died or suffered a serious illness or injury. In the event of this unfortunate circumstance, it’s likely the departing owner and their family’s future would be reliant on the sale of the stake. Planning for the unknown can be hard, but peace of mind and business continuity is paramount.
Reviewing your insurance cover with this in mind could save some difficult conversations and tough decisions in the future. Some cover offers a lump sum payment in the event an owner or partner is unable to stay in the business.
Obtain specialist advice
A standard policy is not always the right choice for a small business owner and. there are products available that have been designed specifically for the needs of SME owners
As well, there are now modular insurance policies available on the market that can be tailored to your business’ individual requirements, so you can obtain the right type and level of cover, without paying for policies you don’t need.
Consider visiting a specialist SME adviser, who can help you to narrow down the range of options and can also regularly review your insurances as your business grows. The right advice can give you more time back in your day to focus on what you do best – running a successful and sustainable business.
Gary Bailison, Head of Individual Insurance, MetLife Australia