Most Neglected Business Insurance Option In Australia

Most businesses insure their offices, computers, cars, etc, but usually fail to recognise their most important asset - the key people. Thus key person insurance is the most neglected business insurance option in Australia.

Only 25% of business owners could maintain their lifestyle for more than 6 months if they suffered a serious illness or injury. (IFSA Research in Nov 2006)

What is key person insurance designed to do?

In general it can be described as an insurance policy taken out by a business to compensate that business for financial loss that would arise from the death or extended incapacity of the member of the business specified on the policy.

The aim is to compensate the business for losses and facilitate business continuity. Key person insurance does not indemnify the actual losses incurred but compensates with a fixed monetary sum as specified on the insurance policy.

For smaller businesses with partners, it is designed to protect each partner. If a partner of a firm dies, usually the other partner or partners need to purchase the shares of the business from the deceased's family. Having insurance permits this to be easily facilitated with correct buy - sell agreements in place.

Insurable losses

There are four categories of loss for which key person insurance can provide compensation:

• Losses related to the extended period when a key person is unable to work, to provide temporary personnel and, if necessary to finance the recruitment and training of a replacement.
• Insurance to protect profits. For example, offsetting lost income from lost sales, losses resulting from the delay or cancellation of any business project that the key person was involved in. Loss of opportunity to expand, loss of specialised skills or knowledge.
• Insurance to protect shareholders or partnership interests. This is insurance to enable shareholdings or partnership interests to be purchased by existing shareholders or partners.
• Insurance for anyone involved in guaranteeing business loans or banking facilities. The value of insurance coverage is arranged to equal the value of the guarantee.

Who offers best Key Person Insurance in Australia?

Rate Detective compares all major insurance companies in Australia. If you don't want to be one of those with "most neglected business insurance option" - please fill out the enquiry form on this page.