South Africa is living in turbulent times – The state of our politics is shrouded in uncertainty and unrest; the beautiful Western Cape is experiencing a crippling drought and economically we have been hit hard by the recent downgrade of our bonds to junk status. Running a business in uncertain times can be tough. However, even though it is easy to be concerned about the short-term pressures brought by rising debt and the destabilised Rand, business owners need to keep long-term certainties in mind.
A certainty that your business will always need is Business Assurance. Risk is a factor in every business and when times are tough, both corporates and small businesses need to find, and importantly keep, the necessary cover.
Here are a couple of ways to cover your business from all bases:
Contingent Liability Cover refers to a policy that a company takes out on the life of a director or an employee that stands as a sort of guarantee for any debts that the business might take on. The cover should be equal to the loan taken out. You as the owner can stand surety for a loan which can cover any start-up expenses or new loans.
Contingent Liability is thus an excellent way of protecting your personal and business interests by making sure your business debts are kept separate from your personal affairs.
Business Trusts are first and foremost about protection, they are a way of protecting your business assets from exposed risk.
By placing your business assets in a business trust, you are essentially covering it from potential hard times without worrying about creditors knocking on your door. Your business is thus covered from risk and you can purchase all your assets simply within one entity.
A Buy & Sell Agreement is a way of creating a way of dividing the business interests and shares of the various shareholders, proprietors or partners. This agreement protects the business in the various circumstances of death, retirement, expression of selling a share or disablement.
Furthermore, the rules of the agreement allow for the remaining shares of the business to be sold within the company.
Key Man Protection is essentially ‘business life insurance’, where a life insurance policy is taken out on your business’s ‘key’ executive or partner. This person is usually essential to the lifeblood of the business and losing he or her would be a major loss. In the event of this ‘key’ person’s death the company would be paid out from the settlement.
You know that your company would be at a loss without it’s essential key players. Key Man Protection is one way of lessening the blow of losing an essential part of the functioning of your business, and lets your company get back on its feet by finding someone new or re-strategizing.
Uncertain times shouldn’t put you off having Insurance, in fact you should feel more secure by having your business covered by a Contingent Liability Policy or a Business Trust. South Africa is a country of resourceful people and strong-minded resolve, don’t you want your business to reflect those principles?
You need to find a Financial Advisor that will do more than advising you on the correct cover. You need an Advisor that will access what risks your business faces, as well as offering you a strategic Business Assurance Plan.
At Prism Employee Benefits we try to do just that – learn more about our product offering here.
By Mark Weston, Director of Financial Wellness
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