Key Person Insurance
Key person insurance is simply life and disability insurance on a key person in a business. In a small business, this is usually the owner or perhaps a key employee or two. These are the people who are crucial to a business--the ones whose absence would sink the company.
Here's how key person insurance works: A company purchases a life insurance policy on its key employee(s), pays the premiums and is the beneficiary of the policy. If that person unexpectedly dies, suffers a critical illness (cancer, heart attack etc) or is permanently disabled, the company receives the insurance proceeds.
The company can use these funds for expenses until it can find a replacement person, or, if necessary, pay off debts, distribute money to investors, or in a tragic situation, key person insurance gives the company some options other than immediate bankruptcy such as selling the business as a going concern or close the business down in an orderly fashion.
Shareholder Buy/Sell Insurance
If you have a business partner(or partners) owning your vineyard then you will most likely have a shareholder (buy/sell) agreement which clearly lays out what will happen, who will buy the shares, how much they will pay for them and how they will pay for them. In other words. When this happens through retirement or if a partner just wishes to sell their shares it provides a ‘certain and predictable outcome’ and is easy to action. However when they exit through disability or death the remaining partners may not be able to quickly fund the exit to the deceased’s estate through cash reserves or lending– especially if they were also a key person within the business. Therefore taking out life and disability insurance to fund the payment of the purchase of shares is generally the most cost effective way to fund the exit and ensures that business decisions can still be made decisively without having to involve a deceased’s estate (or spouse), who the other partners may or may not wish to have an involvement with.
ACC Cover Plus Extra
ACC will normally pay you up to 80% of your taxable income if you are disabled by an accident. Effectively it is just another insurance policy, but the difference is that it’s compulsory.
Self employed people who work on average 30 hours per week and do not pay PAYE can select Cover Plus Extra instead of the standard Cover Plus. Which means that either you can reduce your cover and save money, or increase your cover if you need more.
Cover Plus Extra has many advantages over Cover Plus which include:
1) It’s an agreed amount that you are paid so you do not have to prove your loss if you make a claim. Proving your loss can be difficult and often involves getting up-to-date accounts prepared by your accountant (which is expensive).
2) You can (to a certain extent) choose how much money you want. The range is 40% to 120% of your taxable income. This means that you can select to take a lower benefit and use the savings for private income protection insurance (which covers illness as well as accident), or if you are income splitting to reduce taxable income, increase your ACC cover.