For business owners, there is no opportunity to take paid sick leave. Unexpected illness or injury can result in turmoil for your business if you remain uninsured as an individual. It’s important to insure yourself just as you insure your business if you want certainty regarding your future.
Businesses are constantly on the lookout for ways to increase profit margins and achieve sustainable business growth. It makes good sense to ensure your business doesn’t come to a grinding halt if you are out of the picture for a period of time.
What is income protection?
If you are unable to work due to injury or illness, income protection insurance will provide the bulk of your income, usually around 75%, while you are incapacitated. For example, if your business income is $20,000 per month, your benefit amount will be $15,000 per month. Any amount of monthly business income can be nominated when applying for income protection insurance, but you will need to verify the figures if making a claim.
There are a number of policy options available, with the “waiting period” and “benefit period” being two important considerations. The waiting period refers to the length of time you are off work before the benefits start being paid. The benefit period is the duration of time the benefits will be paid. For example, a waiting period may be 30 days and the benefit period up to 60 years of age. In this scenario you will start receiving benefits after 30 days and they will continue until you reach the age of 60 or recommence work.
Business owner considerations
The fact that the business owner is off work doesn’t automatically translate into a loss of income. Some businesses can continue perfectly well, at least for a time, without the owner present. The insurer will need evidence that business owner’s income is being adversely affected by his or her absence.
Some situations are very straightforward. In the case of an injured trades person without additional staff, it will be easy to determine that their wage has become negligible. In cases like this the income protection claim is quite simple. A different scenario could involve a store owner who has become ill but store revenue remains relatively stable. If there is no noticeable loss of personal income there will be no payout from the income protection policy.
If you are uncertain about which policy suits your needs, it could be a good idea to speak to a professional who will provide various insurance options. To ensure you take out a policy that is right for you, take the opportunity to speak to a qualified financial advisor.
Personal income protection must be owned by you as an individual rather than in the name of your company, but tax benefits are still available. Whether you are self-employed or the owner of a large business your income protection policy is tax deductible. This is an area that can be easily detailed by your accountant.
The motto, “better to be safe rather than sorry” is worth remembering for business persons. There will always be a degree of risk in business, and that is what can make it exciting and rewarding. Personal income insurance can guarantee those hard earned rewards remain in your safe-keeping.
Read more about income proteciton on the ASIC website.