What types of insurance do IT business owners need?
Getting the right insurance is essential for IT business owners, and it can be a lot cheaper than you think. You’re probably already thinking about life insurance — but there’s a whole range of other cover types worth considering.
Here’s the lowdown on the kinds of insurance business owners should consider, as well as how a financial planner can help.
Protect your family’s finances
Let’s start with protecting your income. If you’re the main breadwinner in your family, how can you protect your family’s financial stability?
Here are the main types of insurance that meet this need.
1. Income protection insurance: Provides an ongoing income stream if you can’t work due to illness or injury. Most policies cover 75% of your usual income.
2. Total and permanent disability (TPD) insurance: Covers you if a serious accident or illness leaves you permanently disabled. Unlike income protection, TPD insurance is paid out as a lump sum.
3. Trauma insurance: Covers you during a serious but temporary medical condition: cancer, a heart attack or a stroke. You’re out of action for quite some time, but there’s a strong chance you’ll get better eventually. This is also paid out as a lump sum.
4. Life insurance: Life insurance provides a lump-sum safety net for your family in the event of your death. Some policies also include disability cover.
What about my business?
So you’re confident that your family finances would be protected. But what are the scenarios that could undermine the viability of your business itself — and what cover is out there?
1. Buy–sell protection: If one of your business partners dies or is permanently disabled, their share in the business may go to a beneficiary, usually their spouse. That person may not have the skills or experience needed to run the business. You want to buy them out – but you don’t have the money ready to do so. A buy–sell agreement protects everyone. A solicitor helps you set up a contract which states that when a business partner dies, their beneficiary will automatically receive a lump sum in return for giving up all rights to the business.
2. Key person protection: Tech companies often have one or two people whose skills and knowledge are essential to the business – a manager, a salesperson with all the right connections, or a gun developer. If your ‘key person’ is out of the picture, clients may decide to go elsewhere, or you may simply not be able to deliver the same work. There’s also a good chance your business could lose value (Apple shares dropped 5 per cent the day Steve Jobs died). Key person insurance protects the value of your most vital employees by compensating your company for losing the value they brought to your business.
3. Loan protection: Loan protection insurance covers you if you can’t make loan repayments because you’ve lost a business partner. In this scenario, the insurance may kick in and help pay off the debt.
How much does IT business insurance cost?
IT professionals usually pay less for insurance than professionals in other industries.
IT workers have a much smaller chance of hurting themselves than, say, bricklayers or stunt-car drivers. That means less risk for insurance companies and cheaper premiums for you.
How a financial planner can help
Insurance policies can get pretty complicated. So when you’re deciding on a financial planner to help with insurance, pick one who makes it easy for you.
Luckily, I have access to a tool that factors in your criteria and individual situation. It suggests insurance policies that meet your requirements, and lets you compare them side-by-side to make an informed decision.
Choosing insurance to protect your family, your business and yourself doesn’t have to be expensive or difficult. Get in touch to talk about selecting the right insurance for your needs.