In our final article in this series on managing risk for trade businesses we focus on the risk of something happening to key people in the business (that means you).
FOUR AREAS OF RISK
Is your business’s most valuable asset insured? What would happen to your income if that asset was suddenly out of action?
Here are the facts:
According to ACC statistics, the most common injury for residential builders is to the lower back/spine, with those injured being on ACC for more than two months on average.
According to the Ministry of Health, there are over 10,000 cases of cancer among New Zealand men each year, with the most common forms being prostate, colorectal and melanoma. If you’re between 25-44 years old, melanoma is most likely, if you’re more than 44 years old, it’s prostate cancer.
None of us like to think that it will happen to us, but I know from personal experience that it can. And now I have a family that relies on my income I want to make sure they’ll be looked after if something does happen. So what are the things to think about?
A safe workplace and healthy lifestyle are the best insurance, as is having an annual health check-up that can pick up problems before they get too serious. After all, your car gets a WOF each year so why wouldn’t you get one on yourself?
ACC only covers personal injury
For work related injury this covers accidents, conditions that come on gradually because of your work (gradual process) and infections or diseases caused at work by performing a particular task or being exposed to a particular environment, among others. And an injury caused outside of work could affect your ability to earn too.
But because ACC payouts are linked to your income it is quite common for builders with income levels that fluctuate from month to month to receive lower payouts than they might expect.
ACC Cover Plus Extra
Many self employed people opt out of the default ACC scheme and choose ACC Cover Plus Extra. This means you set an agreed income threshold and will be paid a guaranteed amount in the event of a claim. When combined with private insurance for illness and income protection this can be very cost effective and at the same time substantially broaden your cover.
What if you become ill?
Cancer, heart disease and diabetes are the top three causes of illness for men in New Zealand. None of these is covered by ACC. For any self employed person with a family that relies on their income it’s worth having personal insurance to cover these illnesses if the worst happened. Here are the most common options:
Pays a lump sum upon your death. This could pay off the mortgage, clear other debts or go towards your kids’ education.
Pays a lump sum in the event of permanent disability. This can be linked to your ability to return to your previous occupation, or to work in any job.
Pays a lump sum in the event of certain illnesses that require medical attention and/or surgery.
Pays a selected percentage of lost income if you become disabled or unable to work due to illness or injury. Beneficial in circumstances where ACC payments are limited or not payable.
Private health insurance
For urgent or emergency treatment you will be looked after by the public health system. However, if you need to see a specialist, have non-acute surgery or a diagnostic procedure such as an MRI, the public system will put you on a waiting list. This is where health insurance can help, providing faster access to treatment by avoiding public hospital waiting lists.
Key Person insurance
A key person is someone in the business responsible for generating business income. It may also apply to an individual whose loss has a significant operational impact, such as a project manager. Key Person cover will pay to a business an agreed monthly benefit for a set period if a key person is disabled because of a continuing sickness or injury.
This type of insurance is best discussed with an Authorised Financial Adviser, who will build a picture of your needs and put together a package that best suits your situation. Financial advisers in New Zealand must be licensed and are regulated by the Financial Markets Authority. They are subject to strict disclosure and compliance requirements, much like builders are now. If you’d like to speak to an adviser in your area please give the team at Builtin a ring and we can put you in touch with someone from our network.
That’s the final article in this series about managing the risk faced by businesses in the construction industry.