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In New Zealand, 97% of our businesses are considered ‘small businesses’, with less than 20 employees. Naturally, many of these businesses are owner/operator businesses, or are led by a single director. Businesses such as these need to consider how their business might continue to survive (and thrive) if they, or a key person within their business was to become terminally ill or pass away.

With many different types of insurance available (both personal and business), it can be difficult to know what types of insurance policies you need for your specific business scenario. Cigna can help you understand your insurance needs, the key benefits of insurance products and which mix of personal and business insurance will best suit you.

What is Life Cover business insurance?

Life Cover is a type of business insurance that will provide you with peace of mind, in the event that you, or a key person in your business is diagnosed with a terminal illness, or unexpectedly dies. The lump sum cash payment can ensure your business continues to operate should the worst happen. Some examples of how you might use the Life Cover business insurance payment include:

  • Cash flow injection so that your business can continue to operate,

  • Pay off outstanding business or loans,

  • Recruitment costs to hire a replacement for yourself or key person,

  • Support succession planning,

  • Execute a buy/sell agreement.

How is Life Cover different from Life Insurance or Funeral Cover?

Life Cover is a business-only insurance, so is quite different from a personal Life Insurance policy or a personal Funeral Cover policy. Life Cover is there to support your business - could your business continue to operate if you or a key person was no longer able to work? If you can’t answer yes to this question, then read on for more information.

Life Cover business insurance

A Life Cover business insurance policy may be useful if you are a business owner and your business could no longer operate if something happened to you, or a key person in your business. By applying for this cover, you provide you and your business with peace of mind that you will have a lump sum payout that could allow your team to recruit for a replacement, support your short term cash flow while your team gets to terms with their changing situation, or will allow for a buy/sell agreement to be arranged.

Providing financial and legal advice is also one of the key benefits of this policy which can be useful in a time of significant change, with important decisions to be made about the future of the company. A Cigna Life Cover policy is less necessary for larger businesses with established Senior Leadership Teams or a Board of Directors who could step in and make important company decisions if needed.

Life Insurance

Life Insurance is a personal insurance policy that will provide for your family if you were to die or were diagnosed with a terminal illness. Regardless of whether you’re salaried or self-employed, Life Insurance will take care of your loved ones, and ease the financial burden of losing your salary if the worst could happen. It can be comforting to know that the mortgage could be paid off, other debts repaid, or a nanny or housekeeper could be employed to ensure that disruption to your household is minimised as much as possible.

If you do own your own business, it won’t be used for your business - you name a beneficiary for your Life Insurance policy, who will receive a lump sum or monthly payment. Other common benefits include Bereavement Support and Financial and Legal Advice Benefit. A policy such as Cigna’s Assurance Extra also provides a Funeral Transfer Benefit in case you need to get your remains back to New Zealand from another country. Cigna’s LifeOne policy has a 30 day cancellation policy and an optional Critical Illness Benefit, if you want cover for non-terminal, but serious illness such as a stroke or heart attack.

Life Insurance should be considered at important life stages such as getting married, starting a family or buying a house. Protecting your dependents can provide significant peace of mind.

As you get older, have fewer dependents, and less debt, a Life Insurance policy may no longer make sense for your life stage.

Funeral Insurance

If you suspect that paying for your funeral will bring undue stress and financial strain to your family, you could consider getting a Funeral Insurance policy. Life Cover business insurance will not cover your funeral expenses, although some personal Life Insurance policies do include a funeral benefit as part of their policy. A Funeral Insurance policy has a prompt payout, so your nominated beneficiary can get on with funeral planning, without the stress of wondering how to pay for the funeral itself.

A Cigna Funeral Insurance policy will also refund all your premiums if you were to die of natural causes within 24 months of the cover start date. A Funeral Insurance policy probably isn’t as necessary if you have cash savings, but could be useful if your assets are tied up in property or other investments. 

Choosing the right insurance for you

It is important to get the right cover for your specific situation. If you're unsure as to what insurance product, or combination of insurance products may suit your needs best, do some online research or chat with an Independent Financial Adviser. If you want to understand more about Cigna insurance products, feel free to contact our in-house Insurance Advisers.

When do you need Life Cover as a business owner?

Business ownership can be a very rewarding career move, but does come with additional responsibilities that salaried work doesn’t. Protecting your family from business difficulties and ensuring the ongoing success of your business if you were no longer able to work, are both key drivers in considering Life Cover business insurance.

When you start a business

Just as you wouldn’t buy a significant asset without insuring it, when you start a business, insurance should be one of the first things you organise. It’s right up there with opening your new business bank account or approving your new logo! Small businesses might naturally look at protecting key assets, or having  professional indemnity insurance in place. Protecting your business if you or a key person in your business was to unexpectedly die, or become incapacitated, can be a useful protection too.

Small businesses often rely on key employees, who often hold a lot of knowledge, and sometimes little can be documented to ‘handover’ to someone else if the worst should happen. At least with a Life Cover policy in place, your operation may initially slow down, but a lump sum payment can ensure things get back on track quickly.

When you’re making a business continuity plan

Succession planning and business continuity planning go hand in hand. Who could take the reins if you were to be on holiday, or had to leave the business on a more permanent basis? What would happen if a major earthquake permanently damaged your warehouse or factory? You may have employees relying on you for their monthly salary - you owe it to them to ensure you have a plan in place for your business, should the worst happen - be it a natural disaster or death or permanent disablement of a key staff member. Consider Life Cover business insurance as a sensible addition to your business continuity plan.

If you’re new to business continuity planning, check out this step by step guide as a starting point.

When there are changes to your business

Business growth? Office relocation? New warehouse or factory? International aspirations? Deals, mergers and sales? These examples all represent significant change for your business and may involve tweaks to your current insurance policies, or in fact, additional policies. Growth or extra risk to your company may also warrant you considering Life Cover for the first time. For many businesses, there comes a point when Life Cover makes financial and business sense.

What is included in Life Cover business insurance?

Life Cover business insurance policies do differ from insurer to insurer, but you can expect some standard benefits:

  • Life Cover benefit - if you or a key person was to pass away, your business would receive a lump sum payment that could be used to clear business debt or loans, or execute a buy/sell agreement.

  • Terminal Illness benefit - terminal illness or injury (where you or a key person are likely to die in the next 12 months) can provide you with a lump sum to recruit for a replacement employee or put in place some succession planning.

  • Financial and legal advice benefit - legal and specialised financial advice can add up. Your Life cover policy will reimburse you for these costs (maximum amount will depend on your policy).

You can check out Cigna’s Life Cover policy for more detail.

What is not included in Life Cover business insurance?

Intentional self-harm (including suicide or attempted suicide) is not covered in the first 13 months of starting your policy. An insurance policy is not a quick fix if you’re feeling suicidal - always seek professional help if you’re feeling depressed or overwhelmed with your business or personal life.

How to get Life Cover

It may be difficult to know  which insurance policies you need for your business, but there is plenty of help and support available. Chat to your independent financial advisor, or if you don’t have one, feel free to get in touch with one of our Insurance Advisers.

An insurance adviser will be able to support you to:

  • Understand policy benefits and terms and conditions,

  • Understand legal jargon,

  • Assess both your personal and business insurance needs,

  • Provide insurance product options for you to review,

  • Recommend the best deal for you and your needs.

Cigna can support you to make the right insurance decisions. Are you keen to know more about protecting your business? A Cigna insurance adviser can provide advice about a range of business insurance policies today. Contact us to talk to an insurance adviser or learn more about our insurance products.