You probably have personal insurance policies in place to protect you and your family in case something unexpected happens. You might have car and home insurance or buy a policy for your smartphone or laptop.
Are you doing the same thing for your business? According to Deloitte’s research, up to 25% of Canadian small businesses are underinsured or totally lack commercial coverage. You work hard as a business owner and no matter what industry you’re in, you need to prioritize the company, employees and bottom line.
Whether you work from home or out of an office or storefront, here are five reasons you need business insurance:
Imagine the financial consequences of losing a key employee to illness or death. Maybe it’s the person who has the strongest relationships with your clients, or someone who has a specific skill set that your business requires.
Key person insurance is life or disability insurance that protects the company if an owner, top salesperson or another star employee gets injured or passes away. The company owns the key person insurance policy, and any proceeds are paid out to the business. This ensures that your company remains operational and financially sound until you find a replacement for the key employee.
Many studies have shown that small business owners are at a higher risk of illness and mental health challenges. The Canadian Mental Health Association reported that entrepreneurs are highly susceptible to stress, and that nearly half of them feel that mental health issues interfere with their ability to work. Proprietors also normally work longer hours, putting them at risk for things like back pain and carpal tunnel syndrome. Business overhead insurance can often help cover expenses such as wages and rent, allowing an injured or ill owner to focus on their recovery while the business remains operational.
Some small businesses have more than one owner, and it’s important that each of the partners is properly insured. A buy-sell agreement can make a transfer of the business interest much smoother, and prevent disputes during the sale of the company. A buy-sell agreement will establish the conditions for acquiring the departing partner’s stake of the company, while small business insurance will enable you to receive those funds tax-free when they’re needed.
Small business owners often apply for loans when they’re looking to expand. A creditor may require insurance as a personal guarantee to insure a business loan. It’s a good idea to always protect loans and debts with small business insurance to safeguard your company and give yourself a financial cushion.
Business insurance can also give you a competitive edge when you’re hiring staff. Investing in a group benefits program that includes healthcare, dental and more is an excellent way to succeed in today’s marketplace. There are many programs that can be customized to meet your specific needs. Having these programs in place will show employees that you appreciate their efforts and have their best interests at heart. Creating a culture of trust and security will help you recruit and retain employees and cut down on training and replacement costs.
Having proper insurance is an investment in both your present and your future. RRSPs may not be able to fully support a business owner’s retirement, so a retirement plan funded with insurance can provide the top-up and extra security that’s needed to enhance your income. These retirement-friendly small business insurance programs can also be offered to senior executives to attract and retain valuable staff.
A comprehensive insurance program will strengthen the financial security of your operations — from day one through retirement. There are many small business insurance products, and it pays to take the time to align your requirements, circumstances and priorities. Book a free consultation with one of our advisors to find the best insurance solutions for your business.
Island Savings Wealth Management is a division of FW Wealth Management Ltd. which is a wholly owned subsidiary of First West Credit Union. FW Wealth Management Ltd. is a licensed life insurance agency offering financial planning, life insurance and investments. Mutual funds, other securities and securities related financial planning services are offered through Credential Securities, a division of Credential Qtrade Securities Inc.