Many business owners think of business continuity planning only in terms of preparing for a natural disaster or an accident such as a fire, sprinkler water damage or some other physical occurrence that may cause them to have business down time or possibly even destroy the business operation in its entirety. Usually the business operator is wise enough to think about these possible catastrophes occurring and will obtain the necessary insurance coverage to keep the business afloat if such an occurrence should happen. This is a wise choice, but the unfortunately reality is that most business disasters that cause small businesses to fail and many to shut down completely are not the natural or accidental incidents described above. Where most small business owners are most vulnerable is the loss of business and the possibility of completely losing the business in the event of the business owner or key employee operating the company becoming critically, chronically or terminally ill.
In fact, there is a much greater likelihood that sickness or failing health will occur rather than a natural disaster. The other unfortunate and poorly planned for circumstance is that a substantial number of small businesses don’t have a business continuity plan in place should the owner and or the businesses key employee become critically or chronically ill.
In our highly stressed and goal oriented society a phenomenon as crept up that most people don’t have clue about nor even think about, especially small business owners who are strapped for time, energy, capital and a host of other things while trying to make success of their business. That phenomenon is the reality that approximately 70% of Americans will suffer from a heart attack, stroke or contract cancer prior to reaching the age of 65. That’s a sobering fact. Here’s another sobering fact. Most will live through the debilitating circumstances, but they will suffer tremendously because of the huge amount of debt that will accrue during the critical or chronic phase of the physical malady.
Most will have health insurance, but the sobering fact about that is health insurance will pay the doctors and the hospital. What happens to the business, employees and take home pay of the affected person in the meantime. According to a recent Harvard Law report over 62% will end up in bankruptcy within a year after they suffer a heart attack, stroke or contract cancer. What happens to the business owner that is stricken with this unfortunate incident? What happens to the business that is dependent upon a key employee who is stricken with these circumstances? For the most part the business suffers and cannot make a recovery. More often than not, the business will end up closing. A business career is lost, employees and their families suffer and the economy is adversely affected when one more business fails.
What’s all this got to do with business continuity? Plenty. It doesn’t have to end this way. Business continuity should be more than just planning for natural disaster. Business owners should also plan and put into place a business continuity plan that will continue capital inflow to the business, the business owner and money to acquire the expertise of a qualified replacement for any key employee that might be stricken and can’t work for several months or perhaps never again. Any good business continuity program should have an insurance policy in place that will cover the business owner and or key employees in the event of a critical, chronic or terminal illness occurring.
Such an insurance policy can be obtained through an Indexed Universal Life insurance policy with living benefits. It can be obtained on the business ower(s) or key employees. The key provision is “living benefits”. It is life insurance designed to pay a monthly sum or a lump sum to the insured or the owner of the policy in the event the insured contracts a critical, chronic or terminal illness and cannot be present to maintain normal duties that the business requires. The provisions of such a policy allow for up to 95% of the face value of a life insurance policy to be accessible “tax free” to provide a stream of income in the event a critical, chronic or terminal illness occurs. It’s life insurance you don’t have to die to collect.
For example, if there is a million dollars covering the life of the business owner or key employee who suffers a critical, chronic or terminal illness up to $950,000 could be made available to use to keep the business going, pay overhead, draw salaries and etc. The cost of this policy is also a tax deduction for the business if structure properly. The business, in effect, never misses a beat because there is sufficient money coming in to carrying on and replace the absence of the owner or key employee.
Clearly, business continuation is an important part of any well planned business operation, but most businesses don’t have the type of business continuity plan in place to perform the duties described above. If you have a business there is no doubt you want it to continue to thrive should you have be absent for a protracted period of time if you suffer from a critical or chronic illness. How about your business? Do you have business continuity plan in place that covers you for the events described in this blog post? If you don’t get one now. It is practical, affordable and can save you and your business from disaster. If you’d like information on how this plan can be put into place and protect you and your business send me an email at accesstocaptialsource@gmail.com or call me Toll Free 619-436-5605.
Best Regards
Leave A Response
You must be logged in to post a comment.