Late last year we started looking at some of the personal forms of insurance to assist business owners.
In our first instalment for 2013 we will look at one of the most important yet underutilised forms of personal insurance available to business owners – trauma insurance.
Trauma insurance can provide major benefits to policyholders on a personal level, but it also has some benefits which are specific to business owners and partners.
Whilst we specialise in public liability insurance, we do believe it is important for business owners to know about all of the forms of protection available to them.
What Is Trauma Insurance?
Trauma cover is sometimes referred to as ‘life insurance for the living’. It is a form of insurance which is designed to help you in the event of critical illness or injury.
In the event of being diagnosed with a critical illness your trauma insurance policy will pay you a lump sum amount agreed to at the time you took out the policy.
The funds from your policy can be used to cover medical expenses, travel and accommodation costs, lost income and any other purpose you see fit.
There are dozens of conditions covered by trauma insurance, but the most commonly claimed upon conditions include cancer, heart attack and stroke.
Benefits for Business Owners
Whilst virtually anyone can benefit from trauma insurance, there are some benefits which are unique to business owners.
Let’s say a key person in your business was to suffer a critical illness or injury and was unable to work.
Obviously there would be financial and emotional strain on the employee and their family, but there can also be financial strain on your business if the person was a key part of your revenue and profit.
By putting together a key person insurance package which includes trauma cover, you can ensure that you business will also receive a payout which can replace lose revenue or cover the costs of replacing the key person for a period of time.
Trauma insurance can also be used as part of a buy-sell agreement between business owners. This can help to ensure that business succession issues are managed in the best way possible if a partner in the business was forced to leave the business as a result of a critical illness or injury.
How Much Insurance?
There is no scientific calculation which tells people how much trauma they should have, however plenty of insurance industry participants have their own ideas on how much cover is enough.
If you are insuring yourself personally, the amount of cover you take out may be linked to how much you are prepared to spend on premiums. From our experience, anywhere from $250,000 to $400,000 seems to be an average figure.
If you are insuring someone as part of a key-person or buy-sell arrangement you need to calculate how much money is going to be required in that specific situation. A financial adviser or accountant will be able to assist you with this.
Whilst trauma is technically a form of personal insurance, it can certainly be utilised in a way which makes it an important form of business insurance.
For more information about how you and your business could benefit from trauma insurance please contact your financial adviser.
Here at Public Liability Insurance Australia we have access to a team of qualified financial advisers who can assist, so you can also contact us if you’d like to be put in touch with an expert adviser.