Small Business Insurance Essentials

Are you starting a small business? Having your own business can be a flexible and rewarding way to make a living, but there are certain risks involved. According to a 2011 Australian Government report on small business, the average survival rate for small businesses in 2007-2008 was around 10% lower than their medium and larger sized counterparts. Although not every difficulty can be planned for, having the right business insurance may give your business a much better chance of surviving in the face of a disaster.

The array of different business insurance options available can be overwhelming, so how do you know what you really need? Your exact insurance requirements will depend on the nature of your business, but there are a few types of cover that are essential – no matter the size and scope of your enterprise.

  • Building and contents insurance. Insuring your business premises and any equipment you have means you should be able to claim financial recompense in the event of a fire, theft or certain types of weather damage.
  • Liability insurance. Depending on what type of business you have, there will be certain liability risks. Protecting yourself financially against the cost of being on the receiving end of a lawsuit could not only keep your business safe, it could also prevent you potentially losing your home and any other assets you own.
  • Key person insurance. Up until recently, Australian businesses have been able to insure against the negative financial impact which would arise if a key person dies, suffers from TPD or a trauma event. However, the unexpected temporary absence of an owner of income-generating employee due to sickness or injury can also have a sever financial impact, especially for small businesses where the revenue may be generated by a few people. Key Person Income cover can be used to help against this risk.
  • Commercial auto insurance is essential for any vehicles which are used for business purposes.

There are plenty more options for business insurance cover, including tax audit insurance, marine insurance and even technology insurance to protect against some of the costs of cyber-attacks.

When you are considering your small business insurance requirements, it is always a good idea to get professional advice that is tailored to your enterprise. For an appointment with a qualified Insurance Adviser, contact us.

 

Sources: Innovation report on small business statistics 2011 – http://www.innovation.gov.au/SmallBusiness/KeyFacts/Documents/SmallBusinessPublication.pdf
Disclaimer: Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

 

Which comes first – Saving or Investing?

As a nation, both our level of savings, as well as our level of investment, are higher than many other developed countries’1. But over the last five years there has been a shift in the relationship between how much we save and how much we invest. So what does this say about how we should approach saving and investing in the future to make the most of our dollars?

According to the Reserve Bank of Australia (RBA), the amount we save as a nation started to increase from the mid-2000s, after a period during which the amount we saved started to fall.1 accordingly, from 2000 to 2010 the ratio of national net saving to GDP rose by three percentage points, from 4.9% to 7.9%.2

Interestingly, and although it might seem counterintuitive, saving and investing are not mutually exclusive. Just because we’re now saving more than in the past doesn’t mean we’re investing less. In fact, the RBA has also noted our high levels of household, as well as corporate, savings have allowed Australia to fund substantial investment in the mining sector.

So how do you get the balance right between saving and investing to establish a firm financial foundation? First, let’s take a look at the principles of saving.

The key is to consistently set funds aside beyond what is needed to pay for bills, groceries, school fees and other payments. To do this, it’s important to understand the true cost of these commitments. Once you know how much you need to set aside to pay for your ongoing expenses, you can work out how much you have left available to save. A rule of thumb is to aim to save 10% to 15% of your after-tax income.

This is often more difficult at certain stages of your life – for instance when you start a family. When this happens you might find you don’t save as much as during other stages of your life. Don’t be too concerned – the idea is to develop a habit of saving throughout your whole life, rather than be too focused on the specifics of the amount.

So what’s an effective way to save? One of the most beneficial strategies is salary sacrificing into superannuation. This may allow you to make a tax-effective contribution to superannuation, subject to certain thresholds. It’s a way of increasing your nest egg, while also reducing the tax you pay.

Another saving strategy is paying your mortgage through an offset account. This allows you to use your savings account balance to reduce the amount you owe on your loan, which could lower the interest you pay on your mortgage.

These are just two ways you can help increase your savings. There are lots of other initiatives you can also put in place to help build up the value of your investments over time.

The idea is to work with your financial adviser to put together a comprehensive financial plan that incorporates the right savings and investment strategies to help you achieve your goals, taking account of your individual circumstances and life stage so you can make the most effective use of your financial resources. Contact your financial adviser today.

 

Sources
  1. Bishop, James & Cassidy, Natasha ‘Trends in National Saving and Investment’, RBA, 2012
  2. ‘Measure of Australia’s Progress, Australian Bureau of Statistics (ABS),2010
 Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

Discover how the inner circle can help you. Contact us today for a financial consultation.

This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs.
Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs.
Odyssey Financial Management is an authorised representative of Total Financial Solutions Australia Limited.