Most Australians have inadequate life insurance, with research suggesting that as a nation we have a life insurance shortfall of around $100 billion.
But whilst the issue has been widely discussed and documented, there has been little discussion around the issue specifically in relation to small business owners.
The potential consequences of small businesses being uninsured or underinsured, can be much further reaching than those for underinsured individuals. That’s because most small business owners don’t just have family members dependent on them, they have employees and suppliers, and so the economic flow-on of a small business owner dying or being disabled can be much more devastating.
In this regard, the recent findings of a survey conducted by the Cameron Research Group are alarming, and suggest that the small business underinsurance issue could be a ticking time bomb. Their survey, ‘The Australian Small Business Market for Financial Services: 2010’ contained some disturbing statistics about small business owners and life insurance:
- Whilst 100% of Small Business Owners (SBOs) have heard of Life Insurance, only 65% of them have cover
- 3 in 5 SBOs have no TPD cover
- 9 in 10 SBOs with loans have no loan protection in place
- 3 in 4 SBOs have Trauma cover
- 3 in 5 of SBOs have no Income Protection Cover
These figures paint a picture of small businesses placing their families, business partners and employees at risk, especially when one considers that even something minor like a broken leg or glandular fever could leave a business owner unable to work and generate an income for weeks or even months. With no protection in place, the pressure of ongoing business expenses without an income to cover them may prove too much, and it is not uncommon for small businesses to close for this reason.
Whilst help is at hand – in the form of a wide range of life insurance solutions suitable for small business owners – it can be a complex area, especially as there are issues such as tax, ownership, and partner ‘buy-outs’ to be considered. To the extent that the wrong cover can be as bad as no cover, small business owners should seek the advice of a financial adviser specialising in this area.
At Keyperson Life Insurance we have already tailored life insurance solutions for many small business owners. For more information contact us today on 1300 785 577