As an entrepreneur, you take risks and test you abilities in the marketplace every day. But what if something happens to you, or your sales director meets with an accident? Is your business equipped to handle emergencies like these?
A lifetime of work and dreams can be dashed if a key person is suddenly incapacitated. Creditors may panic, withdraw all credit facilities and ask you to repay your debts immediately.
Your company may face a decline in profits because of the distruption in operations. Employee morale may hit rock bottom as workers wonder about the viability of the company.
Business takaful improves your odds by reducing the financial consequences of events beyond your control.
Do not confuse this type of takaful with personal life takaful. If you have a spouse and children who depend on your income, then you should have personal life takaful for your family. Business takaful is only for your company.
Key man takaful
Key man takaful is life takaful taken out on the key person in a business. This usually the owner, the founders or perhaps a key employee such as the managing director. These are people whose absence could potantially damage the company.
Under the policy, the company receives the pay-off if the key person dies unexpectedly. Hopefully, the amount will help the company survive the blow of losing the person. The company can use the proceeds to buy time as they find a replacement, pay off debts, and tide the company through the hard times.
Credit protection takaful
If you have taken out a bank loan to finance your business, the institution lending you the money will insist on a guarantee that its loan will be repaid.
If proper risk management is not in place, your personal estate could be used to settle outstanding debts of the company. Your family will get what is left if there is anything at all. Under this policy, the takaful payout can be used to pay your business loans.
Buy-sell agreements
When a business owner dies or retires, a buy-sell agreement can enable his business to be as stable and well-managed as possible.
It ensures that his estate sells his business interest to those whom he has chosen. The owner's estate will also have liquidity by converting his business interest into cash.
This amount can be used to settle the estate and establish an income stream for his beneficiaries. It guarantees a fair and reasonable price for his business or stock.
Contractual retirement
Many companies are caught in a dilemma--they take plans to groom an employee only to have the person poached by a competitor with deeper pockets. Aside from offering him higher pay or perks, an effective retention strategy is to take out a contractual retirement plan.
This is essentially a pension plan that takes the form of a takaful policy. Companies buy into it to show that they care about the employee's retirement.
The company can choose to give bonus payouts to the employee at regular intervals or a one-time lump sum at retirement. Most importantly, the funding of the policy makes minimum impact on the company's cash flow yet ensures return when the employee retires.
Takaful is not just about protection against disasters. It has positive benefits and advantages for business owners. It can help you retain valuable employees, protect your company from sinking when it losses a key person as well as protect your family and personal estate from creditors.
As in all takaful policies, buy one that matches your needs and budget so that your company will not left in dissarray when the unexpected happens.