1. Insurance for small business owners
Presenter: dd month 2016
[Adviser logo]

2. Disclaimer/AFSL details etc This information is current at January 2016 and is subject to change. As this information (including the statements on taxation which are of a general nature only and based on current laws, rulings and interpretation) has been prepared without considering your objectives, financial situation or needs, you should, before acting on this information, consider its appropriateness to your circumstances. OneCare is issued by OnePath Life Limited (ABN , AFSL ) (OnePath Life) and OneCare Super is issued by OnePath Custodians Pty Limited (ABN , AFSL , RSE L ) (OnePath Custodians). You should read the product disclosure statement, available at onepath.com.au, before making a decision about the products.
Note to Advisers - Please ensure that you satisfy your disclosure obligations as an Australian Financial Services Licensee when providing this presentation to retail clients.

3. About small business
97% of Australia’s actively trading businesses are small businesses1
61% of small businesses have no employees2
66% of business owners are male3
Just over a third of Australia’s business operators are women (34%), and their numbers are rising3
ABS Media Release, March ‘The number of Australian businesses have increased’
ABS Report, March 2015, Counts of Australian Businesses, including Entries and Exits, Jun 2010 to Jun 2014’
ABS Report , 2015 ‘Profile of AUSTRALIAN WOMEN in BUSINESS’
First, some statistics about small businesses...
There are around 97% of Australia’s 2.1 million actively trading businesses are considered small businesses. That’s based on having annual revenue less than $25 million and fewer than 50 employees (according to ASIC).
Most of these business are sole traders, with 61% having no employees. A further 27% have 1-4 employees.
66% of SME operators are men… but the percentage of female business owners is increasing.
Sources:

4. Who’s going to look after you?
If you’re self-employed you don’t have the same entitlements as employees:
No sick leave or annual leave
Generally no workers’ compensation insurance
No superannuation guarantee
When it comes to preparing for illness or injury, you need to do it yourself
As you know, running a business gives you the freedom and flexibility to make all of your own decisions.
But one of the downsides of being self-employed is that you don’t have some of the safety nets that employees have:
No sick leave or annual leave
Generally no workers’ compensation insurance
No superannuation
When it comes to preparing for the possibility of illness or injury, you need to do it yourself

5. Protection for business owners
You also have more to protect...
Lifestyle expenses for yourself and your family
Mortgage/rent and personal debts
Plus...
Business debts
Other fixed business costs
Personal guarantees or jointly-held loans
Business owners also have more to protect than regular employees.
First and foremost you have your family to consider:
Starting with lifestyle expenses like food and groceries, bills, holidays, etc
Then you’ve got your mortgage or rent, and any personal debts you need to pay off
Plus, you have additional responsibilities to do with your business...
You may have additional business debts (and these may be secured by your personal assets)
You probably also have some fixed business costs that will be there as long as your business is
Any personal guarantees or jointly-held loans which must be extinguished before your estate’s assets can be released

6. Protection for business owners
If you were unable to work...
What would it mean for your income?
What about your family’s lifestyle?
How long would your personal savings last?
How long would the business survive?
How would you save for your retirement?
What would your business be worth?
Now take yourself out of the equation.
If you can’t work due to a serious illness of injury:
What would it mean for your household income?
What about your family’s lifestyle?
How long would your personal savings last?
How long would your business survive?
How would you save for your retirement?
What would your business be worth?

7. The need for protection
Workers compensation generally doesn’t cover injuries that happen away from work, or provide protection against serious illnesses.
Any social security payments may not cover your medical and living expenses. There may be waiting periods.
Private health insurance doesn’t help you with your everyday living expenses and is often capped.
Can I get by without life insurance?
Many people think they’ll receive financial assistance through Workers Compensation, their health fund, or the Government in the event of injury or illness.
However, here are some things to think about:
Workers compensation generally doesn’t cover injuries that happen away from work, or provide protection against serious illnesses like cancer and heart attack.
The amount of Social security payments you're eligible for may not cover your medical and living expenses. There may also be waiting periods in place.
Private health insurance doesn’t help you with your everyday living expenses and is often capped.

8. Protection for business owners
Life insurance strategies should consider the cost to:
Fund ongoing living costs for you and your family
Fund ongoing business expenses
Repay or service debts (personal and business)
Meet child education needs
Meet medical expenses
Maintain savings and retirement plans
Allow your spouse to take time off
A comprehensive life insurance strategy needs to take into account the financial needs of your family, and your business.
Such a strategy should include protection to:
Fund ongoing living costs for your family
Fund ongoing business expenses
Repay or service debts (personal and business)
Meet child education needs
Meet medical expenses
Maintain savings plans
Allow your partner to take time off

9. Did you know…? • According to a 2014 KPMG report1:
Only 27% of disability insurance needs are being met through existing cover
35% of Australians have no form of disability insurance
• According to research on the impact of the sudden disability of a parent2:
Before a parent became disabled, 11% of parents without insurance rated finance as ‘struggling’. After disability, this rocketed to 62%
75% of those without insurance agreed that in hindsight a policy covering disability would have helped
If you look at the underinsurance statistics among young families, it makes scary reading....
27% of disability insurance needs are being met through existing cover
35% of Australians have no form of disability insurance
So if all these families don’t have enough life insurance, who are they likely to turn to for help? 1.
KPMG report for Financial Services Council, 2014
IMPACT OF DEATH OF A PARENT ON SURVIVING PARTNER AND CHILDREN report. Research conducted by Ipsos on behalf of ANZ Wealth April – May 2015

10. What about the National Disability Insurance Scheme?
Does it replace the need for life insurance? No… here’s why:
Designed to help the most severely disabled people, not everyone who has a disability.
Doesn’t cover temporary conditions that may occur. Such as disabilities from a car crash or from a serious illness.
It’s main purpose is to give people who are severely and permanently disabled more personalised assistance and a greater connection with their community. Not financial support.
Available in limited regional areas, with roll out not until 2019/2020
Even if you are eligible, it can’t help you eliminate debts, provide an replacement income or cover the out-of-pocket costs of medication and treatment.
The NDIS provides a safety net, but it was not designed to replace life insurance – which continues to play a vital role in paying out debts and replacing income after the onset of disability.
It’s worth noting that there is no provision to cover costs for illnesses such as cancer under this program, whereas life insurance can cover these costs.

11. Protecting your true income
There’s more to income protection than reviewing your tax return...
Does your spouse earn an income from the business, and would it stop if you did?
Are you re-investing profits in your business?
What are you really worth to your business?
One of the questions you need to ask yourself as a business owner is this – what is your true income from your business?
Sure, you can look at your latest tax return and show what you earned last year. But is that figure a true reflection of your earning potential?
For example, does your spouse derive an income from the business? And would that income be there if you weren’t?
Or are you reinvesting profits in your business, rather than taking the money as income? And would those profits be there if you weren’t?
When you take out life insurance, it needs to reflect what you’re really worth to your business.

12. OnePath, one of the market leaders for business owners
Flexible disability definition helps you stay in touch with your business as a small business owner. You may work up to 10 hours , or earn up to 20% of your pre-claim income, while receiving full benefits.
TPD of up to $10 million which allows you to take a higher level of cover to help fund a business buyout
Packaging discounts of up to 10% when you take out a policy with a spouse, immediate family member or business associate
OnePath is one of the market-leading insurance companies when it comes to business owners.
$10m TPD allows you take a higher level of cover if you’re a white-collar business owner. If you’re in a partnership, this money could help you fund a business buyout if you’re permanently disabled.
OnePath also offers packaging discounts of up to 10% when you take out a policy with a family member or business associate.

13. Types of cover available
Life cover for death and terminal illness
Helps the family reduce debts and stay in the family home
Help reduce business debts
Provides an ongoing income for the family
Pays medical bills and funeral costs
Allows funding for the replacement of the key person in the business
Income protection cover for sickness or injury
Helps families keep up with mortgage repayments and day-to-day living expenses
Premiums are generally tax-deductible
So what types of life insurance are we talking about?
The main types of cover are:
Life cover, which is basic cover for death and terminal illness.
This type of cover helps families eliminate debts and stay in the family home, it provides an ongoing income for a spouse and children, and it helps cover any medical bills and funeral costs.
Income protection cover for sickness or injury.
Usually known as ‘income protection’, this type of cover helps families keep up with the mortgage and everyday expenses – like school fees, electricity bills etc
The premiums for income protection are generally tax-deductible

14. Types of cover available
Total and Permanent Disablement (TPD) cover
Helps eliminate debts and cover long-term care costs
Pays for modifications to the family home
Allows funding for the replacement of the key person in the business
Trauma cover for serious illness
Pay out-of-pocket medical costs
Helps your spouse take time off work to provide care
Allows you to make lifestyle changes – like reducing work hours, or taking an extended holiday
TPD covers people who suffer a total and permanent disability.
This helps people who can never work again by helping them pay off their mortgage, and pay for a carer if they need one. If you’re in a wheelchair for example, it can also help pay for modifications to the family home. It also allows for Allows for funding a replacement of the key person in the business
Trauma cover covers a number of serious illnesses, like cancer.
Trauma cover can help cover the medical expenses not covered by private health insurance, which can run into the tens of thousands of dollars when you’re talking about diseases like cancer.
It can also allow a spouse to take some unpaid leave to provide care, and encourages people to make the lifestyle changes the need to recover properly – like reduce their work hours or take an extended holiday.

15. Types of cover available
Business expense cover for sickness or injury
Pays a monthly benefit to cover your fixed business expenses – such as tools and equipment hire, motor vehicle leases and advertising commitments
Helps keep your business running in your absence
Premiums are generally tax-deductible
Can fund a locum replacement in the business while you recover
2015 OnePath paid over $116 million in Income protection and business expenses insurance
Business expense cover is similar to income protection in that it pays a monthly benefit for sickness or injury. The difference is it is related to the fixed expenses of the business, not your income.
It pays a monthly benefit to cover costs such as tools and equipment hire, motor vehicle leases and advertising commitments
With your fixed costs taken care of, Business expense cover is designed to keep your business running in your absence
Like income protection, the premiums for business expense cover are generally tax-deductible

16. Advice about life insurance
It’s important people seek tailored advice that takes into account their income, debt levels, family status etc
A financial adviser can help with strategies to make life insurance more cost-effective, including insurance inside super
Everyone’s different of course, so the best way for miners – or anyone for that matter – to get a comprehensive life insurance plan is to speak to a financial planner.
We take into account things like your income, your debts levels, and whether or not you have any dependants.
We can also help you get the right mixture of life insurance products, and structure your insurance in a way that’s most cost-effective. For example, you may take out life cover and TPD cover inside super – which helps you take advantage of some of the tax concessions within the super environment.

17. Thank you
Questions?