Widgets Case Study

Widgets Pty Ltd has 21 staff, where 5 are administration, 15 are in the manufacturing process and 1 (Mike) is in sales. Jim is the owner and looks after 30% of the existing customers and runs the manufacturing side of the business. However Mike looks after 70% of the existing customers and is responsible for bringing in all of the new business. Due to his unique blend of product knowledge and sales ability, the blow to the business would be devastating if Mike was suddenly unable to work.  

Mike suffered a serious motor vehicle accident while driving to Baffle Creek to go fishing. He was airlifted to Brisbane where he would need to spend 6 months being treated and rehabilitated. The effect on the business was dramatic. New business dried up completely, reducing revenue by 40%. This meant that 40% of the manufacturing line had to be made redundant. The Bank noticed the drop in revenue had breached their profitability covenant and called the loan in. Jim was suddenly faced with potential bankruptcy. In addition, he wanted to help Mike’s family financially, but was just unable to, due to the business downturn.

If Jim had considered the Key Person risks in his business he could have put the following plan in place:
  • Income Protection insurance for Mike which could be part of Mike’s salary package, and would have ensured that Mike’s family was financially looked after.
  • Business Expenses insurance on Mike (owned by Widgets Pty Ltd) – this would have meant that all of the staff could be retained, covered the recurring expenses of the business and would have the effect of  stopping the bank covenants from being breached.
  • A Key Person (Trauma) policy on Mike (owned by Widgets Pty Ltd), which would be sufficient to reduce the Business Bank debt by 50% (payable on diagnosis of a cancer among other listed events) and to replace loss of revenue. 
Sitting down and considering the risk to your business if one of your key employees couldn’t work, could mean the difference between your business surviving or going under.  It could also make a huge difference to the family of your employees.  

Don’t put your business at risk – email or call us on (07) 4154 0425 to implement a sound risk management plan for your key employees.

Protection Process 

  • Comprehensively collect your details via a Data Collection Form
  • Complete a Personal Risk Statement with you
  • Conduct a needs analysis with you
  • Liaise with multiple underwriters to determine best outcome based on occupation, medical, definition and price considerations
  • Ongoing annual reviews to ensure level of cover remains appropriate

your success. your life – it matters at Ulton!

 
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