How long could you keep paying the bills if you had a serious accident? Income protection insurance is a cost to business that entrepreneurs probably can’t afford to do without.
Smart Company:
4 years ago, Stefan Kazakis decided to get serious about income protection insurance. His business coaching company, Action Coach, has a 6-figure monthly turnover, generating a big income for the 39-year old serial entrepreneur, and he wanted to make sure his young family’s lifestyle – and the debt repayments on his large property investment portfolio – were covered if he couldn’t work for a lengthy period.
‘Income protection means I can sleep,’ says Kazakis, who has cover for 60% of his current income until he’s 65, with a 30-day waiting period. ‘I see it as a cost of goods sold. It’s taken me a lot of hard and smart work to get to where I am, so it would be a gross misconduct of my business not to have it.’
Income protection insurance (sometimes called disability insurance) pays you a monthly amount if you are unable to work because of sickness or injury. You can take out an agreed value policy, to receive a set amount, or an indemnity policy that pays you up to 75% of your income over the year or two before you make the claim. Premiums are 100% tax deductible.
Penelope Joye, a senior financial adviser with Sydney firm Taylor Shadforths, says her SME clients often resist the idea of income protection at first, seeing the cost as money out of the business. But she says it’s vital, because many entrepreneurs have quite a bit of debt – and no savings to tide them over, because they channel all their spare money into the company.
‘If they get sick, their business grinds to a halt and they’ve got no income,’ says Joye, who recently had a 40-year-old super-fit client suffer 2 crushed kneecaps when he was knocked from his bike. He was away from his business for 5 months, unable to sit, stand or walk.
‘Your ability to earn an income is your most valuable asset,’ Joye says.
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