In the daily push to grow and manage operations, many business owners neglect one of the most important tools for long-term sustainability, which is business assurance. This is according to Hennie Oosthuizen, Financial Adviser and Business Assurance specialist at GrowthHouse Financial Planning Services. He notes that it is often misunderstood and undervalued; it’s a powerful framework that protects your company, your partners, and your family from the unexpected.
“Many entrepreneurs think they’ve got a plan in place,” Oosthuizen shares, “but when we look closer, there are glaring gaps. Often they undervalue their businesses or leave outdated agreements in place, exposing their legacy to risk.”
Planning For The Unplanned
Oosthuizen explains that while most business owners think of business assurance as a buy and sell agreement to ensure a smooth transition when a business owner leaves, retire or passes away, its scope is far broader.
The whole point of having business assurance is to plan for the unplanned. It steps in to ensure the survival of a business (and thus the livelihood of many) when the business owner becomes unable to run the business, to prevent key personnel from leaving the company, and to repay secured loans should the owner or director who secured the loan pass away.
The various products that fall into this category include:
- Key Person Insurance: Cover taken out by a company on the lives of essential personnel, the owner or an executive to help cover financial losses associated with hiring a replacement or stabilising operations.
- Contingent Liabilities: Cover to pay off loans or debt of an owner or key individual that has signed a surety, preventing financial strain on the company or the individual’s estate, in the event of death, disability or critical illness.
- Personal Surety Solutions: Investments to free business owners from personal financial exposure.
- Business Continuity Planning: Ensuring the company can survive leadership or ownership transitions, and also planning for any tax implications.
- Liquidity Investments: Helps businesses build cash buffers for emergencies, bonuses, or provisional tax payments.
However, it is important that an entrepreneur speak to an advisor about the product that is right for their business before signing up for it. There might be nuances to your business that only an experienced insurance broker is able to point out.
Why SMEs Can’t Ignore It
“You’re not just protecting shareholders,” Oosthuizen continues. “You’re protecting staff, customers, suppliers and your own family’s financial future. Many assume business assurance is only for large corporations. But SMEs are the most at risk.”
“In smaller businesses, the owner is often the entire business,” says Oosthuizen. “If they die or become disabled, everything falls apart.” This points to a reality many individuals easily forget: One small business can employ tens or hundreds of people, who in turn could be the breadwinner for just as many households consisting of two or more people. The death of a business, be it because of a deceased owner or other factors, can result in hundreds of people losing their livelihoods and falling into poverty.
Functions of Business Assurance and Planning Ahead
One vital function of business assurance is that it also prepares owners for retirement and succession. “Careful consideration of tax implications is required when an owner would like a child or family member to take up the reins,” says Oosthuizen.
“Business owners often view insurance as a grudge purchase until it’s too late. But business assurance is not just about protection; it’s about enabling growth, preserving value, and building a legacy.
“Business owners spend 30 or 40 years building something incredible,” Oosthuizen reflects. “But if you undervalue it or fail to plan, your family may not see the rewards. That’s why business assurance is no longer optional; it’s essential.
3 Key Messages for Business Owners
Oosthuizen shares three powerful takeaways for business owners:
- Protect your legacy: “Your business may be your retirement plan, but without proper structuring, your family could lose its value.”
- Plan for more than death: “Don’t just think about ‘what if I die.’ Plan for retirement, for handing over the business, and for accessing capital when needed.”
- Invest in cash flow buffers: “Unit trusts and income funds offer businesses flexible, tax-efficient.”
Business assurance should not be an afterthought. It is a vital part of planning for unforeseen circumstances and ensuring that dependents, such as employee,s remain protected.
