Life insurance and Income Protection for the self-employed
Written on the 5 February 2018 by ArrowThere are over two million self-employed Australians in the workforce today.i Running your own business can be rewarding in many ways. However, without the safety nets and security offered by larger corporations, it's important to consider financial protection as part of essential business planning.
When small business owners think about their insurance needs, they immediately think to put cover in place to protect their physical assets, such as cars, equipment and buildings. However, they often miss the most important asset in their business themselves and their key people.People are the most important asset in any business. If a person is lost to a business due to death, sickness or disability it will have a significant impact. An event like this can lead to a drop in revenue, loss of clients and could even lead to the banks calling in any debts or liabilities.
What are the benefits of income protection for the self-employed?
Premiums are tax deductible and you can also choose to fund these through your superannuation.Why do you need life insurance if you are self-employed?
Being self-employed means that you not only carry the personal obligations associated with providing for your family, but also the business expenses that may need to be paid out in the unexpected event of your death. This includes any outstanding accountant, lawyer and adviser fees, Government taxes and any overheads relating to employee salaries, suppliers and lease payments. It's important to ensure the proper safeguards are in place so there is no risk to their estate.
A death in the business may also result in a change in the business ownership structure. If a business owner dies, their shareholding rights may revert to their estate. For the remaining business partners this may mean that they are now in business with people they have may have no intention of being in business with.Life insurance if purchased as a stand-alone policy is not tax-deductible for the self-employed. However, income protection and business expense cover are both tax deductible as stand-alone policies.
As most businesses are unique, it's important to seek advice to assess your situation and work out the cover that best meets your needs.i https://www.youtube.com/watch?v=REsTulSPuFY