Business Insurance

Introduction to Business Insurance Potential Business Insurance needs

Introduction to Business Insurance

Ensure peace of mind for all the owners in your business that their personal estates are protected, the continued existence of the business are protected and also for the clients of the business that the business will be able to continue with its normal day-to-day functioning if something unforeseen should happen that could otherwise ruin the business. Read more about the different needs that could be identified in the business by clicking on the appropriate link.

Potential business insurance needs:

Suretyship Protection Raising finance in the business world can be critically important to sustain operations and growth. (Contingent Liability) Owners who wish to borrow capital usually have to sign personal suretyship on behalf of their businesses with the result that the owner's estate could be held liable for the businesses debts. In order to separate personal financial needs from business obligations, the solution is to take out a suretyship protection plan (also known as contingent liability insurance).            Loan Account Protection When any business starts out, it requires financing to be able to purchase any essential equipment, stationery or other items, as well as to be able to pay the regular expenses like salaries, telephone expenses, rental, etc. When a business has no assets, there are only two ways to raise this financing, either by issuing shares or borrowing money. Because the owners do not want other people involved in the business, they normally rely on the loan method. The simplest route would be to go to a bank or other lending institution, but it is important to remember that they all ask for security and charge interest on any loan. If the business is not able to provide sufficient cash flow to meet this obligation, the alternative is for the owners and/or directors to make a personal loan to the business. The terms of such personal loans are normally done informally with no written contract, with no fixed term and do not reflect the payment of any interest. This is reflected on the balance sheet of the business as a long-term liability that only needs to be repaid at an indeterminable future date.            Business Overheads Cover To cover the running expenses of a business when a key owner is absent due to disability and he/she is unable to contribute to the normal turnover.            Keyperson Cover Many business owners recognise their staff to be their most valuable asset and invest an enormous amount of money in retaining them. But what would the financial impact on the business be if a key staff member dies or becomes permanently disabled? How can the business protect itself? The solution for the business is to take out keyperson insurance on the lives of these key employees.            Debtors Cover Often businesses are compelled to grant credit to certain purchasers of their goods or services in order to make sales. While sales are essential for the survival of a business, credit sales bring with them a risk of default or non-payment. Where the debtor is a large entity, the risk of this is relatively low and therefore acceptable. However, if the debtor is him/herself the owner of a relatively small business, the risk of default due to the owner's death or permanent disability is large. Where a bad debt concerns a substantial amount of money, it can have a catastrophic effect, potentially causing the creditor, through no fault of the creditor, to be declared insolvent.            Alternative Financing Businesses usually structure the purchase of assets - whether these are immovable property, machinery or equipment - and operating capital through traditional banking products. The terms of the traditional loan facility/structured finance deal are such that the business pays back both capital and interest over the specified term. The result of this method is that by the time that the business has repaid all the capital, it will need to start from the beginning again to refinance a replacement asset. Is there an alternative repayment method? The answer is YES.            Corporate Investment As a business owner you are aware of certain large expenses you will need to pay in the future or any capital items that you will need to acquire or replace. The cost of these items must either be paid out of the business's cash-flow or through bank financing. If the bank loan route is followed there are two additional expenses, ie interest and a deposit that must be taken into account. How do you overcome this problem? Through holistic financial planning!            Business Continuity (Buy-and-Sell) Most people spend a great deal of time and effort planning, establishing and operating their biggest asset, a business. Many entrepreneurs also consider it to be the source of their retirement capital, as well as income for their families when they are no longer able to run the business.            Income Replacement. The need is for the business to insure itself against the risk and costs associated with the situation where the owner or an employee/employees are unable to perform their normal functions at work due to temporary or permanent disability.            Loan Account Redemption When any business starts out, it requires funds, possibly through financing to be able to purchase any essential equipment, stationery or other items, as well as be able to pay the regular expenses like salaries, telecoms, rental, etc. When a business has no assets, there are only two ways to raise this financing, either by issuing shares or borrowing money. Because the owners do not want other people involved in the business, they normally rely on the loan method. The simplest route would be to go to a bank or other lending institution, but it is important to remember that these all ask for security and charge interest on any loan. If the business is not able to provide sufficient cash flow to meet this obligation, the alternative for the owners and/or directors is to make a personal loan to the business. The terms of such personal loans are normally agreed informally with no written contract, with no fixed term and do not reflect the payment of any interest. The balance sheet of the business reflects the loan and interest as a long-term liability that only needs to be repaid at an indeterminable future date.            Staff Retention Employees are no longer content to work for one employer for the rest of their active lives without sufficient compensation. In addition, employers have come to realise that the turnover of staff have serious financial consequences for their businesses. It has become imperative that employers find additional methods to retain the services of such staff members.           
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