The importance of insurance
Experts say don’t go without it Protect yourself and your business
Whether you own a catering company or hair salon, there are risks involved in owning a small business.
Personal insurance is one way a business owner can minimize her or her exposure to risk. When insurance advisers at the Co- operators Group speak with small business owners, they divide the discussion into two categories, says Paul Mlodzik, vice president of marketing and sales at the Co- operators Group. The first is insurance to protect a business owner’s family while the second area is insurance that will help the business continue to run even if the owner can’t operate it.
Critical illness insurance can help in both instances by providing you with a lump sum of money if you are diagnosed with a potentially terminal illness.
“ If you’re diagnosed with one of those, but you don’t die . . . you can use the money to pay for additional treatment or you can help hire someone else to maintain your business,” Mlodzik says. A second type of personal insurance worth looking at is disability insurance.
If you are the main breadwinner in your family, and you get in a car accident, which results in a disability, what will happen to your family? What will happen to the business?
Despite its importance, disability insurance is often overlooked by business owners.
“ We have found through some of our research that the thing most independent business people neglect the most often is their disability insurance,” Mlodzik says.
That’s likely because a lot of small business owners began working in the corporate world where their employers had disability insurance. When they open their own business, “ they forget about the fact that they aren’t covered for that anymore,” Mlodzik says.
Life insurance can also help ensure the continuity of a company should one of the owners pass away.
“ If you have a business partner . . . and the business has accumulated some value over time, if one party dies and the other party needs to buy out that share of the business from the other person’s family, there isn’t a lot of cash lying around usually.” As a result, in some cases the business will fold. To prevent that, a lot of business partners buy life insurance on each other.
“It’s called a buy-sell agreement,” Mlodzik says.
“ If one of them dies prematurely, there will be enough cash for the other person to buy out the business.”
For help finding an insurance broker, or other insurance related information, visit the Insurance Brokers Association of Canada’s website ( www. ibac. ca) for a comprehensive list of brokers.