Sick or injured: How long will your business survive?

By Simon Keir, Westlawn Senior Insurance Specialist
22 February 2017

What would happen to your business if you got sick and couldn’t make it into work for a week? What if you were injured and out of action for a month? Or worse still, 6 months? 

How long would your business survive? 

Industry super fund REST posed these and other questions to the owners of small and medium enterprises (SMEs) in its November 2016 Bridge the Gap report.

Most business owners play an integral role in both the long term success of the business and in its day-to-day operations.

It’s the business owners who have the vision.

It’s the business owners who have invested their time and money.

It’s the business owners who have an intimate knowledge of the business.

It’s the business owners who have spent years developing and nurturing vital relationships with clients, suppliers and other key partners.

It’s therefore likely that business operations would be severely affected if a business owner was suddenly unable to work for an extended period. Employees, suppliers and customers could also suffer.

What the Bridge the Gap report found was that Australia’s SMEs are exposed to the loss or temporary incapacity of their owners due to sudden death, illness or injury, and that this exposure isn’t adequately covered by insurance.

How long will your business survive without you?

When asked how long their business could survive (remain profitable) without them, the REST report found that 29% of business owners believe the business would not last one month. And in total, 72% of respondents couldn’t see the business lasting more than 6 months.

Source: Bridge the Gap November 2016 

Sole traders appear especially vulnerable

According to the report, most sole traders had difficulty answering the question.

Of those sole traders who did provide an answer:

  • 58% had insufficient insurance to last a week
  • Two-thirds had insufficient cover for a month, and
  • 94% had insufficient cover to last 6 months.

Wake-up call

The report’s findings provide a wake-up call for businesses in terms of the risks associated with the unforeseen absence of a business owner.

To ensure you, your family and your business are properly protected in the event of illness, injury, disability, or worse, a tailored insurance package incorporating the following is vital:

  • Life insurance
  • Total and Permanent Disablement (TPD)
  • Income protection
  • Trauma cover
  • Business expenses insurance
  • Insurance for effective succession planning including key-person insurance, buy/sell insurance and loan guarantor insurance.

Income protection & business expenses

Income protection, for example, can provide you with up to 75% of your regular earnings while you are unable to work due to illness or injury.

Read our case studies of how income protection assisted 2 self-employed clients.

While income protection can provide you with the necessary household living expenses, your regular business expenses will still need to be paid. This is where business expenses insurance can help you keep your business afloat while you’re off work.

Business expenses insurance pays certain business expenses for up to 12 months while you’re unable to operate your business due to illness or injury. Expenses covered can include rent or loan repayments on business premises, property rates, taxes and levies, vehicle and equipment leases, utilities, professional fees and even salaries and superannuation for staff who don’t generate any revenue (such as admin staff).

You can find out more about your insurance options here.

About the Bridge the Gap report

Bridge the Gap is based on research conducted among Australian workers and employers using an online survey between 27 May and 6 June 2016.

In total, 1,701 surveys were conducted around Australia including 184 entrepreneurs, 282 SME owners/managers and 64 sole traders (530 in total).

You can download REST’s Bridge the Gap report here.

To find out more about insurance to protect your livelihood and your business, contact Simon Keir today:

Copyright © 2017

General Advice Warning
The information provided is intended to provide general information only and the information has been prepared without taking into account any particular person’s objectives, financial situation or needs. Before acting on such information, you should consider the appropriateness of the information having regard to your personal objectives, financial situation or needs. In particular, you should obtain professional advice before acting on the information contained herein and review the relevant Product Disclosure Statement (PDS).

Westlawn Life Insurance Pty Ltd ABN 91 164 146 285 is a Corporate Authorised Representative (No. 444800) of ClearView Financial Advice Pty Limited ABN 89 133 593 012 AFS Licence No. 331367 GPO Box 4232, Sydney NSW 2001.