Whether your mining and resources business is a startup or a growing concern, you need to think carefully about how to protect it. Business insurance policies can potentially save your business when things go wrong, but only if you’ve taken the time to check that the business and its assets are adequately and appropriately covered.
A growing range of business risk policies for specific events and circumstances is now available, but how will you decide which suit your situation? This is not a question to be taken lightly – the risks are too great. We strongly recommend you seek professional advice, but in the meantime here’s our concise and helpful outline of the business insurances you should consider.
Business insurance policies are designed to shield your business and key individuals from the negative financial consequences of unforeseen events. Here’s an outline of the range of policies that may be appropriate in your particular situation.
Key Person Insurance
Many mining and resources businesses have an owner, business partner or team member who has crucial or highly specialised skills or who may be responsible for building and maintaining critical relationships with major clients or suppliers. What would happen to core business activities if that person was unable to work? It’s quite possible that business revenue would be badly affected, with disastrous consequences. Key person insurance can also provide cover against business losses that may be incurred as a consequence of the prolonged absence or death of the business owner or a key member of staff.
Business expenses insurance generally provides a monthly financial benefit (for up to 12 months) that covers up to 100% of your allowable ongoing fixed business expenses in the event that a key income generator for the business suffers a serious injury or illness. These fixed expenses may include rent, utilities, vehicle expenses, and the net cost of an equally qualified person performing your role.
Buy Sell Insurance
Buy sell insurance provides financial security between business partners and their respective estates. In the event of a partner passing away, becoming critically ill, suffering a disability and being forced to leave the business, buy sell insurance provides a financial benefit that allows the remaining business partners to buy out the exiting business partner’s shareholding.
Inclusion of Professional Events
This insurance specifies trigger events, such as becoming a partner or commencing professional practice, that, should they occur, allow you to increase your cover without having to provide further medical evidence. This insurance can be most relevant to those who may in the future consider such an event possible or likely.
Income protection insurance is especially important to enable you as a business owner to meet your personal financial obligations in the event that you are unable to work.
The question often arises with business owners of whether they should opt for an agreed or indemnity contract. With an agreed value policy, you are required to verify your income when applying for income protection and your income is agreed to at the start of your policy. This means you will know what you will receive regardless of your income at the time of claim.
Generally, clients who are self-employed or are concerned about income fluctuation will consider an agreed contract. Often this option is not as cost effective as an indemnity style policy but it provides you with more certainty of your benefit amount if you need to make a claim.
Home Duties Income Protection
This insurance is designed in principle for professionals no longer working in their profession, but engaged in home duties on a full-time basis. If you rely on a partner who has given up their professional career to keep the home fires burning and raise the family whilst you grow your mining service business, it will be worthwhile for you to investigate this type of cover with your financial adviser.
Career Break Benefit
This type of insurance allows you to take a career break and continue your income protection insurance at a reduced level, with the option to return your cover (without medical underwriting) to the previous higher level when you return to work. This provides peace of mind about being able to cover future insurance needs while meeting the your changing lifestyle needs.
Caring for Your Child Benefit
This allows you to take time off to care for a sick child and receive your income protection benefit for up to 6 months.
Change of Plan Ownership
Plan ownership may be transferred (or a replacement plan issued if moving in or out of super) at any time with no underwriting. This gives you flexibility if, for instance, you want to change from insurance owned by super to insurance owned by an individual or entity, with the condition that the old and new plans are like-for-like. Additionally, if you were paying level premiums on your old plan, you can continue at the same level after the transfer.
Flexible Premium Structure
Flexible premium structures allow you to have both a stepped and level premium structure on the one insurance cover, allowing you to tailor your cover to benefit from the advantages of both premium structures.
Your next step…
You may have specific circumstances in your business life where an unexpected event could be critical for your business and, ultimately, your family. A professional adviser is able to look ‘outside the box’. Their discerning and practiced eye will locate integrated and complementary policies that cover all the ‘what ifs’ pertaining to your unique situation.
It is helpful to think of financial protection as an investment. You will need guidance regarding the ‘small print’ of the conditions and entitlements in the policies you are considering, and to help you find the most appropriate cover for the premium you wish to budget for. Professional assistance will also be invaluable during the application process where full disclosure is often critical to a successful claim should the need arise.
Seeking professional advice with full disclosure also means that you can reasonably expect that your full entitlements should be paid if you ever need to claim, leaving you to focus on continuing core business activities without the additional stress of pressing financial concerns.
Resources Unearthed is a solutions hub that provides integrated financial, legal and business advisory services for executives, professionals and business owners in the mining and resources sectors.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decisions.