BUSINESS
Assurance
E C N A R U S S BUSINESS A
What type of assurance is pense they ex an is suitable for a small business e nc ra su as s rs feel busines s. se es sin such as a restaurant, bar or bu ed ish Some business owne bl ta it as a luxury for es tavern in townships? cannot afford, or see ess assurance can be expensive, it’s an of sin th bu ng le ue tr or s e it’ siz , gh ry ou st th Al indu In the case of a sole proprietor, Business ess, regardless of the expense every busin ude in its budget. Loan Cover can be used for short to cl ager medium term business loans and existence, needs to in Ferdi Booysens, Greenlight Product Man ks overdrafts. If you have key personnel, Donald Makhafola as estions regarding business assurance. Key Person Cover would ensure the qu l ia uc cr at Old Mutual business can continue should the key person die or become disabled. Business Overheads Replacement Cover is important for any self-employed person, because if you’re temporarily off work for two or three months, your overheads can be covered with the monthly proceeds from your cover.
Ferdi Booysen, Greenlight Product Manager at Old Mutual
How important or necessary is it for a small or start-up business to have business assurance? If you look at small businesses, the pressing concerns are sales, client service and profitability. Since business owners are focusing on these aspects of the business, holistic enterprise risk management often gets left behind, which means that significant risks to their businesses are overlooked. Some of these risks are related to the death and disability of business partners or key individuals within the business.
How can smaller businesses be encouraged to buy business assurance? 28
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Succession planning and the exit strategy for the business owner will drive the right conversations around business insurance between the owners and their financial advisor. As a starting point, advisers would focus on the individual needs of the business owner through estate planning. For instance, how will the family be taken care of if they die or are too disabled to work? Estate planning however should go hand in hand with the continuity plans of the business, and together they form the foundation for good succession planning. In the case of a family business, it’s important to identify the successor(s) and their role(s) and responsibilities within the business, where ownership is intended to continue into the next generation.
Should you as a business owner have business partner(s), a Buy-and-Sell Agreement should be put into place. If one partner dies, the remaining partner(s) will have the option to buy out the deceased partner’s share in the business. This will ensure that the business can continue with business as usual. A Buy-and-Sell Agreement must be in place between the partners alongside the Buy-and-Sell Cover, and the agreement regulates the terms of sale on the death or disability of a partner. Without Buy-and-Sell Cover, the remaining partner will face delays and uncertainty while waiting for the deceased partner’s estate to be wound up. The remaining partner may also end up with the spouse or children of the deceased as business partners, which may put undue strain on the running and profitability of the business.
What are the common risks faced by these kinds of businesses in regards to assurance? Let’s say for example that the business is a partnership. The first risk is that one of the partners dies. There’s also a risk to the family of the partner who dies – especially if the family is reliant on the business owner for their household income. And here are some of the questions to ask: • What impact will it have on the management and income of the business?
