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When we think about business risk, we often tend to think only about risks that can be insured by your property and casualty agent. Yet, the coverage you get for liability, business interruption, as well as auto and property damage are all equally and extremely important. You should have regular meetings with your liability agent and review all of the risks that your business faces.
For some of your business risks, you will choose to insure through an insurance company, while for others you will determine that you’re better off self insuring. For example, if you were in the vending business, you would choose to self-insure for vandalism. The cost of purchasing this type of coverage is so high that purchased insurance is not affordable. In addition, most of your assets are spread out and the chance of having a huge number of vandalism incidents would be relatively minor.
We find that the risks that are usually ignored by most business owners are the personal risk that you face on a daily basis. The risk of what would happen to your business if you couldn’t work any longer or weren’t around to make your company run should be considered at the top of your list to safeguard both your family and your business.
Protecting your family
Business survival is the primary risk when you are no longer able to work. This is commonly covered with disability or life insurance.
Yet, we often find that there are two problems with the risk of disability or death. First, most business owners don’t carry disability insurance. The owner believes that if they become disabled, their business will continue providing the income they need to live on.
It’s true; your business might be able to provide income for a period of a few months. But, many businesses we work with won’t exist if the owner can’t come to work for as little as six months. There is a significant chance that a disability of this magnitude can happen. An even bigger chance is that you might become disabled, be able to return to work, but not work in the manner you formerly worked. With many businesses, if this happened the business would significantly suffer. Often, the impact is enough where the business might not continue to exist.
The second personal risk is the lack of adequate life insurance for your family. With this risk we often see several problems. Many times all of the life insurance on the owner’s life is owned by the business. If the owner dies, the creditors of the corporation will often have rights on this cash.
Another problem we often see is there is not enough life insurance in place to continue the lifestyle for the family when you’re no longer here.
Solutions for these issues
In most cases for personal life insurance, we suggest that business owners purchase enough term insurance to adequately keep your family’s life style going with the assumption that your business will no longer have value to provide.
We strongly suggest that you have a personal risk assessment as well as a corporate risk assessment done. With a business risk assessment the following areas are covered:
• Life insurance review for having proper ownership.
• Life insurance review for having the proper coverage.
• Disability insurance review for how long your business can exist without you at full strength.
• Review of disaster planning for the largest risks your business faces.
• Review of key person agreement to help your business, yourself and your family get through corporate disasters.
If you have any questions about your business and its ability to last beyond a personal disaster, please give your Stage 2 Consultant a call. They would be glad to explain our review process and help you understand how to protect yourself if the worst happens.
If you would like more information on our firm, please visit us online or e-mail us and a Stage 2 associate will get back to you.
With Warm Regards,
Stage 2 Planning Partners
Josh Patrick © 2006
Securities and Investment Advisory Services offered through NFP Securities, Inc., A Broker/Dealer, Member NASD/SIPC and a Federally Registered Investment Advisor.
Stage 2 Planning Partners is an affiliate of National Financial Partners Corp., The parent company of NFP Securities, Inc. Representatives listed on this website are currently registered to conduct securities business in the following states: AZ, CO, CT, FL, IL, IN, MA, MT, NC, NH, NY, PA, RI, VA, VT, WA
NFP Securities is not affiliated with Harris- Murray
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