Case Study: Probability of disability

This chart shows the probability of at least one partner becoming disabled for six months or longer, but none dying before the age of 65.

Business succession planning in action

When Pete and Richard went into business together more than 20 years ago, they did not imagine that their combined talents would build a $2 million injection moulding business. As a specialised plastics engineer, Pete’s abilities were perfectly complemented by Richard’s ability to market and sell their products.

As the business grew, they recognised the need for shareholder protection, so they put together a business succession plan that included a buy/sell agreement that would be funded by AIA Life Cover if one of the partners died. Two years ago Richard, aged 52 at the time, arrived at work complaining of indigestion; three hours later he was dead.

His wife and children had no wish to join the plastics industry, so as a condition of the buy/sell agreement, Pete bought out Richard’s shares with the funds generated by the Life Cover.

Intangible Assets

As a woman in business, I understand the financial responsibilities faced by many Kiwi women. My husband recently started his own business and we have two girls, aged three and five, so my income and my ability to work are critical to my family’s welfare. I am very focused on protecting my assets and have ensured that I have the right insurance in place to do so.

Society is trending towards women taking on more financial responsibility as the typical family structure is changing, with many women now doing everything from earning the money to paying the bills and looking after the financial future of their families. However one thing that is commonly overlooked by both men and women is the ability to provide for their families in the event they cannot work because of illness, accident or even death.

It’s not ignorance or carelessness, it’s a Kiwi thing. We think we’re invincible, but the truth is, you never know what’s going to happen.

Think of the Canterbury earthquakes and Queensland floods: if something disastrous and beyond your control affected your business and that business supports you and your family, what measures are in place to protect your business and your family?

There are also enlightening statistics as to the probability of death among business owners; for three partners in business with an average age of 35, the probability of at least one partner dying before age 65 is 41%. For four partners in business, it’s 51%.

It does make you think doesn’t it?

Many people protect their possessions but fail to protect their own lives and livelihood, an oversight that poses one of the biggest challenges facing those who are starting businesses – understanding what their risks are. Risk assessment is critical. Without this, getting the right insurance is guesswork at best.

The good news is, it’s a lot less complex than it sounds. We will work with you to understand your risks and develop an effective plan that will suit both you and your business.

The right financial protection can be the difference between the protection of your dream or its loss. Take control – it’s in your hands.

HOW WE NEGOTIATE THE MINEFIELD

Identify potential losses

The role of the Business Risk Adviser is to assist management in identifying several types of potential losses, which may include the following:

• Property losses
• Business income losses
• Liability losses
• Untimely death or disability of key people
• Job related accidents, and/or
• Employee benefits loss exposures.

Evaluate Potential Losses

We assist in the eradication and measurement of the impact of potential losses. We then rank these in order of severity of impact on the business.

Studies show that most businesses have too much exposure to risk and most are under-insured ie they don’t see the minefield. One study shows at least 40% of all small businesses have a critical dependence upon key people for ongoing business and balance sheet solvency.

Implementing the Programme and administering can include:

• Implementing and administering effective insurance programmes
• Participating in loss prevention programmes and/or
• Installing employee benefit programmes.