Business Insurances

Helps your business offset the loss of revenue associated with the loss of a key person who is responsible for driving the revenue of the business.
A drop in revenue is often inevitable when a key person is no longer there. This could be someone in your client’s organisation who generates significant revenue for their business. Losses may also result:

• while your finding and training a suitable replacement
• from demand that cannot be met
• from errors of judgement that can happen due to a less experienced replacement, or
• through the reduced morale of employees.

The problem

Loss of revenue and replacement costs – if there isn’t a suitable replacement within the business, it may take substantial time and financial inducement to find and train a successor, let alone restore any loss of revenue during a very stressful time.

The solution

Key Person Insurance can provide your business with enough money to compensate for the loss of revenue and associated replacement costs to replace a key employee or business owner should they die or become disabled.

Business Expenses insurance ensures the continuity of your business, providing them with a business to return to following a period of illness, or a business to sell as a going concern.

Running a successful business takes time, money and lots of hard work. So insuring their business should be at the top of your client’s mind when they’re thinking about what might happen if they were totally disabled and couldn’t work.

If you are self-employed or in a small partnership, it’s even more important to keep the business going and therefore they need to not only insure their income but, the fixed, regular expenses of the business, as well.

Business Expenses insurance provides protection specifically to meet the fixed costs of their business. If you are self-employed or operate a small business, their ability to operate their business is imperative to its success. Without them, their business may struggle to operate, yet its associated expenses will continue. Business Expenses can provide your clients and their businesses with cover for certain business expenses for the period that they are unable to operate those businesses due to disability.

A Buy/Sell arrangement is a contract that allows transfer of a business to remaining owners if one owner dies or suffers a serious illness/injury and is unable to stay in the business. This is often coupled with insurance policies to provide the money to buy out the departing owner’s share. This allows remaining owner(s) to continue running the business and helps to ensure that the departing owner or their estate will be fairly compensated for giving up their rights to the business.

Why is Buy / Sell Insurance important?

Buy/Sell insurance can help minimise the risk of:

• The remaining owners having to sell the business to pay out the departing owner or their estate
• The control of the business or its assets being frozen due to legal difficulties created by the departing owner, or their spouse or estate
• A departing owner, or their spouse or estate, taking legal action over a valuation or pay-out figure
• A departing owner’s spouse deciding (against the wishes of the continuing owners) to become an active partner of the business (rather than taking the pay-out)
• The departing owner’s spouse or family taking their legal right to claim a share of the business profits without having to work in the business
• A departing owner’s spouse or estate selling their share of the business to an unsatisfactory third party.

There are three types of risks that can be covered by Buy/Sell insurance:

• The death of a business partner (life insurance)
• Total and permanent disablement (TPD insurance)
• Suffering a trauma such as heart attack, stroke, cancer, and paraplegia (trauma insurance) with long-term implications.

Ownership of the policies
There are several options available when it comes to policy ownership:

• Self-ownership – where the person insured is the policy owner. This is the simplest structure and the person insured keeps control of their own policy, even if they leave the business.
• Cross-ownership – where the business owners take out insurance on each other. The policy ownership changes with changes in business ownership.
• Insurance trust – where a trust owns the policies on behalf of all business owners. This means policy ownership is not affected by changes in business ownership.
• Business entity – where the trading entity owns the policies on the business owners’ lives. Policy ownership is not affected by changes in business ownership, unless the person insured wants the policy assigned to them when they leave the business. The business uses the insurance proceeds to buy back the departing owner’s (or their estate’s) share.

When considering ownership of a policy, you need to consider control of the policy, payment of premiums, the business structure, the potential for ownership changes and tax on the receipt of insurance proceeds. The Buy/Sell Agreement also needs to match the policy ownership structure. Advice is key.

What happens if I need to make a claim?

If you need to make a claim, our commitment is to ensure we make a real difference at a difficult time. You’ll have a dedicated case manager who’ll work with you throughout the claim, taking the time to get to know you and understand your needs. Their focus is helping you through your claim as quickly and easily as possible.

At Rich River Wealth we are also committed to:

• Helping you understand what happens during a claim and explaining things in everyday language
• Providing practical solutions that support your circumstances
• Doing as much as possible over the phone and keeping paperwork to a minimum.

How Rich River Wealth can help: