Business Cover

Key Person Protection Insurance

Key employee protection insurance, key person insurance,or business disability insurance is an insurance product that protects your business against the loss of a key employee.

Key person insurance provides a safety net that ensures the continuity of your business, should a key member of staff suffer from serious illness or death.

When a business loses a key employee, the business can suffer in many different ways.

The key insurance payout provides financial protection for the business from these ramifications, including:

Loss of profits the key person would have generated
Loss of business contacts
Repayment of loans
Loss of suppliers or customers
Loss of crucial inside knowledge of your business
Paying for recruitment and training of a replacement
Winding down a company in an timely, legal fashion

Income Protection Insurance is the main option for cover with the option to include another three: Life insurance, traumatic illness, and disability cover for the key person.

Life Insurance Key Person Cover
If a key employee dies or is diagnosed with a terminal illness, the business is provided with a lump sump.
Traumatic Illness Key Person Insurance
Pays a lump sum if the key employee suffers from a serious illness, including cancer, heart attack and dementia.
Total and Permanent Disablement Key Person Cover
If the key person is totally and permanently disabled due to injury or illness, a lump sum is paid out.

Shareholder Protection Insurance

Shareholder protection insurance, also called buy/sell agreements, allows business owners to buy shares back from any partner upon diagnosis of a critical illness, terminal illness or death. This policy enables surviving owners stay in control and minimises disruption to the business. The deceased owner’s dependents have a willing buyer and cash instead of a share of the business.

Common reasons for taking out shareholder protection insurance include:

Maintaining control of the business by being able to buy the deceased’s or critically ill person’s shares
Making the transition of shares from one owner to another as smooth as possible.

Shareholder protection insurance is a contract between all the shareholders of your business, which sets out exactly what will happen if one of you can no longer participate in running it. You can insure against the death of a shareholder or serious illness or injury. The agreement allows the remaining shareholders to buy their shares in the business at an agreed price, using a lump sum payout from your insurance policy.

Key benefits of having a Shareholders Protection Plan

Shareholder protection can be paramount for small businesses since many smaller firms might struggle to raise buy-out capital at short notice.
Businesses don’t need to save up capital or dip into their savings for funds to purchase an outgoing shareholder’s stake in the firm.
If a shareholder dies without a policy in place, their stake in the business could be inherited by an unwelcome beneficiary or sold to a rival.
The insured person’s beneficiaries have clarity over the amount they will receive for the company shares when the other shareholders buy them out.

ACC CoverPlus Extra (CPX)

As a business owner, contractor or self-employed, you have to pay ACC levies for an Accident only disability insurance called CoverPlus, which is designed to cover up to 80% of your last tax year income if you’re injured and unable to work.

ACC CoverPlus Extra is superior because it pays an agreed monthly compensation, and you can save money on levies.

In addition, it allows for a personal loss of income protection plan that is designed to fit you and your family, covering medical or illness related issues.

What is ACC CoverPlus Extra (CPX)?

CPX is an optional agreed value income protection insurance that covers self-employed people and non-PAYE shareholder-employees that can negotiate a pre-agreed level of loss of earnings compensation.

This way, you know exactly how much you’ll receive each week if you are injured and can’t work. However, compared to a private income protection policy, ACC is an expensive type of cover.

In addition, if you choose CoverPlus Extra, this will replace your standard CoverPlus cover.

CPX is especially suited to those who:

have fluctuating income, either yearly or seasonal
want to apply for more or less cover than your actual income
is newly self-employed with no earnings history and wants assurances around your cover.
want to reduce the CoverPlus Extra levy and get private insurance
if your business would continue generating income if you were injured and couldn’t work
you might split your income with a partner or spouse or take advantage of options to reduce your tax.

CoverPlus Extra has several important advantages above the default ACC CoverPlus, which is more beneficial.

ACC Restructuring

Using ACC CoverPlus as the only source of income protection can be tricky.

If you are diagnosed with an illness, you will not be eligible for ACC benefits. Instead, you must rely on Work and Income (WINZ) until you can return to work.

In addition, there are specific gaps in terms of disease and degeneration, and switching to Cover Plus Extra is the first step toward filling those gaps.

Solutions for self-employed and non-PAYE shareholder employee

If you are self-employed or a non-PAYE shareholder employee, various options are available to upgrade your cover to Cover Plus Extra and save some money.

Non-PAYE Shareholders can change their ACC classification codes with ACC CoverPlus Extra (occupation codes that determine your level of risk and levies).

There are relatively few instances in which ACC CoverPlus Extra would not benefit business owners or sole traders, and it is free to set up. As a result, many New Zealanders have benefited from reclassification.

Self-employed and contractors have more options with ACC CoverPlus Extra. For instance, If you have a life insurance policy and private income protection or are applying for it, you may be able to reduce your ACC cover to lower your levies.

ACC CoverPlus vs ACC CoverPlus Extra

We can look at strategies to reduce your level of cover with ACC and save you money on levies.

We can then invest the levies saved in a private insurance package that pays you and ACC in the event of an accident and covers illness-related events, giving you the best of both worlds and better outcomes at claims time.

ACC CoverPlus

Invoiced based on your last year’s financial earnings
Pays 80% of your previous years earnings (limits and conditions apply)
Will be reduced if your business continues to generate income during your time off work
Will reduce even further as you return to work on a part time basis
You must prove loss of income

ACC CoverPlus Extra

Clarity at claim time
Invoiced based on your level of agreed cover
Pays 100% of that agreed cover
It does not conflict with continued business income
Pays 100% of benefit as you return to work part-time
You do not have to prove your loss of income

There are only a handful of situations where ACC CoverPlus Extra isn’t the best choice for business owners or sole traders.

Group/Workplace Insurance Options

There are significant benefits for both the employer and employees if a plan is set up in the workplace. Below you'll find the Group/Workplace Insurance options.

Group Private Medical Insurance - We offer group health Insurance plans tailored to fit your business needs and well-being to promote a healthy, happy and productive workforce.

Group Life Insurance - Group life insurance shows employees you value what matters most to them – their loved ones.

Group Trauma Insurance - Group critical illness/trauma insurance pays your employee a tax-free sum if they are diagnosed with a critical illness or condition covered by the policy

Group Disability Insurance - Group Total Permanent Disablement insurance gives you protection against total and permanent disability by providing a lump sum payout if you can never work again.

Group Income Protection Insurance - Group disability insurance protects your employees’ most valuable asset—the ability to earn an income, even if they’re too sick or hurt to work.

Modern Financial will help you determine the right type of Group/Workplace cover for your business.

Get in touch with us for an initial
no-obligation chat today.