Farming is a big business. While new technology has modernised farming operations, like most other enterprises of a similar scale, there is still a large reliance on specific people, their skills, experience, and knowledge. If one of those specific people cannot work for an extended period, it can create significant pressure on those left behind to fill that void and to keep the business operating well.
So, what happens if a key person within this sector gets injured or critically ill? If injured, then ACC can provide replacement income to the individual concerned. However, they base their calculations on the taxable income of the individual (not the business), which rarely reflects their real value to the business. This could mean that any ACC benefit paid is lower than the income lost by the business, or does not cover the cost of employing alternative staff.
Can you insure for this type of risk? Can insurance fund cash flow into a farming or rural business so it can continue to pay its expenses, support revenue, protect cash flow and/or fund an interim farm manager to get the business through until the key person recovers or other decisions can be made? It can.
The right insurance can provide sufficient cash flow to the business until the key person can return to work. Monthly insurance payouts in the farming context are not uncommon up to $50,000 a month ($600,000 per annum), which in the short term will keep the bank happy, ensuring that loans don’t need to be called up nor personal guarantees triggered.
This is called Rural Key Person Insurance. To find out more, contact Jason Kilworth at New Zealand LifeBrokers on 0212214065 or jason@nzlifebrokers.co.nz
Disclaimer: The above information is of a general nature only. It does in no way constitute insurance advice, and readers should contact Jason or their client manager for advice relating to their specific circumstances.
