For business owners, making sure your business is financially protected can feel overwhelming. Business owners face a unique set of challenges when it comes to managing risk. Insurance can play an important role in reducing the financial impact on your business in the case of uncontrollable events such as disability, critical illness, or the loss of a key shareholder or employee.
This infographic highlights the importance of corporate insurance.
The four areas of insurance a business owner should consider are:
- Health
- Disability
- Critical Illness
- Life
Health
In Canada, we are fortunate to have a healthcare system that covers basic services for citizens and permanent residents. However, not all healthcare-related expenses are included. In reality, about 30% of our health costs* are paid out of pocket or through private insurance for items such as prescription medication, dental care, glasses, and physiotherapy.
For business owners, offering employee health benefits makes smart business sense. Health benefits can be part of a compensation package that helps retain key employees and attract new talent.
For those looking to provide alternative health plans cost-effectively, a health spending account may be worth considering.
Disability
Most people protect their homes and cars, but many overlook protecting their greatest asset: their ability to earn an income. Unfortunately, one in three people on average will be disabled for 90 days or more at least once before age 65.
Consider the financial impact if you, a key employee, or a shareholder were unable to work due to illness or injury. Disability insurance can provide a monthly income to help keep your business running.
- Business overhead expense insurance provides monthly reimbursement of expenses during total disability, including rent, utilities, employee salaries, equipment leasing costs, accounting fees, and insurance premiums.
- Key person disability insurance provides monthly funds while a key employee is disabled, protecting the business from lost revenue while you find and train a replacement.
- Buy-sell disability insurance provides a lump-sum payment if your business partner becomes totally disabled. These funds can be used to purchase the disabled partner’s shares, fund a buy-sell agreement, and reassure creditors and suppliers.
Critical Illness
Many of us assume that a critical illness, such as a heart attack, stroke, or cancer, is unlikely, yet almost three in four (73%) working Canadians know someone who experiences a serious illness. This can have devastating consequences for you, your family, and your business.
Critical illness insurance provides a lump-sum payment so you can focus on recovery rather than finances.
- Key person critical illness insurance provides funds to the company to supplement income, cover debt repayment, pay salaries for key employees, or cover fixed overhead expenses while the insured recovers.
- Buy-sell critical illness insurance provides a lump sum if a partner or shareholder suffers a critical illness. These funds can be used to purchase the partner’s shares, fund a buy-sell agreement, and reassure creditors and suppliers.
Life
As a business owner, both your employees and your loved ones depend on you for financial support. Life insurance not only protects your business but can also serve as an investment vehicle for excess company funds.
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Key person life insurance can be used to provide a lump sum payment to the company on the death of the insured, so it can keep the business going until an appropriate replacement is found. It can also be used to retain loyal employees by supplying a retirement fund within the insurance policy.
- Buy-sell life insurance provides a lump sum to buy out the shares of a deceased partner, fund a buy-sell agreement, and reassure creditors and suppliers.
- Loan coverage life insurance helps pay off outstanding business loans and debts.
- Permanent life insurance can also be used to reduce taxes and diversify your portfolio. Beyond protection, it allows you to deposit excess company funds (within government limits) for tax-free growth, reducing taxes on passive investments and broadening your portfolio.
Talk to us about making sure you and your business are protected.