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Protecting Your Company with Insurance7/15/2019 Practically everyone needs insurance, but it’s a must for business owners. If you are ill or get into an accident, who is going to run the company while you are recuperating? If you are unable to work, things can deteriorate quickly as bills and daily tasks collect.
Key Person Insurance Key person insurance is popular among business owners, as it protects the company in the event that an owner, or other executive, gets injured or dies. The policy is taken out by the company in the name of the designated key person. Funds are paid out to the business, and can then be used to replace the key individual or keep the business going some other way. In most cases, a company would take out a 10- or 20-year term insurance policy on the key person, as it’s the most cost-effective kind of insurance, says Mike Thomas, Vice President, Insurance Distribution at IG Wealth Management. Coverage is determined by how difficult it would be to replace that key individual, and what skill sets they possess, he adds. “You should be looking at the economic loss of that person.” In a tragic situation, key person insurance gives the company some options other than immediate bankruptcy. If the company is a sole proprietorship, then key person insurance isn't necessary. However, you may want to protect your family, in which case you should consider personal life insurance for that purpose. Property/Contents Insurance You also need to protect your assets and earnings in the event that a disaster or emergency destroys part or all of your business premises (and its assets). Property insurance will cover the property and buildings owned by your business in the event of destruction or damage. Contents insurance covers assets that you store at your business premises. If you are leasing space for your business, the owner probably has property insurance, but you are likely responsible for your own content insurance. If you run your business out of your home, you will likely need separate content insurance for your business assets. Disability/Critical Illness Insurance Disability insurance provides business owners with income for a specified period of time, if you are unable to work due to injury or illness. Critical illness provides a lump sum payment in the event of the diagnosis of a serious illness, such as cancer. Like key person coverage, the company would be the beneficiary and the money can be used to pay employees or hire new staff, says Thomas. There are other types of business insurance on the market, such as partnership insurance (also known as buy-sell insurance). If your business partner passes away, partnership insurance will allow you to purchase the shares and continue running the business. You might also want to consider general liability insurance to cover injuries on your property, or errors and omissions insurance, which covers mistakes in the provision of professional services. It can be overwhelming, but insurance is a necessity for business owners who want to protect themselves. Consult an accountant or a full-service financial advisor to determine which types of insurance are right for you. Dwayne Rettinger Executive Financial Consultant Investors Group Financial Services Inc. This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. Dwayne Rettinger is solely responsible for its content. For more information on this topic or any other financial matter, please contact an IG Wealth Management Consultant. Insurance products and services distributed through I.G. Insurance Services Inc. Insurance license sponsored by The Great-West Life Assurance Company. Comments are closed.
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