By Jackie McCann-Scott, Invested Mama
I am writing this month’s article from the comfort of my home office . . . whether I want to or not.
My stretchy pants are complemented by a nice top so I can be presentable for the virtual meetings that fill my calendar. And yes, I am in fuzzy slippers. I guess social distancing has come with a few perks.
2020 has been nothing if not eventful. From digging out from #snowmaggedon to settling in to stop the spread of COVID-19, this year has been a lot. And it is barely even summer. The stress these back-to-back events have placed on daily life is one thing, but you are also trying to keep your business afloat during these uncertain times. No one ever said entrepreneurship was for the faint of heart, but this is a lot. (Did I already say that? It is worth repeating.)
Fortunately, because of the worldwide scope of this latest crisis, government has provided some relief to business owners. This has come in the form of access to loans, wage subsidies, tax relief, and rent reduction programs. But even with these measures in place, some businesses will not survive.
But some will. In fact, many will get to the other side of this pandemic battered but better. More resilient. More creative. Leaner and more focused. They will also be more aware of the importance of planning.
When you get to the other side, here are a few concepts to consider.
Business interruption insurance
Available through general insurance providers (i.e., home and auto), business interruption insurance is designed to replace lost revenue while your business is closed because of a covered event or loss. Normally, a business owner will add this coverage as an optional benefit on their commercial property insurance for an additional premium. As with most insurance plans, there are several variations available, and you will have to weigh risk against affordability. The premiums are a deductible business expense.
Policies will detail what is and what is not covered by listing specified “perils.” They will also define how the benefit amount will be calculated. Some typical items this may cover include gross revenues (based on past earnings of the business), fixed costs, wages for employees, and temporary relocation costs. The Co-operators have a great explanation on their website (www.cooperators.ca) that outlines some of these features.
Business overhead expense coverage
Regardless of what may be happening in the world around us, few will deny the direct relationship between the success of a small business and the owner’s direct input and effort. It is not uncommon for the owner to generate most of the revenue for a small business, and if that owner is unable to do so because of an injury or illness, the bottom line can suffer.
Business overhead expense (BOE) insurance covers the cost of keeping your business running while you are focusing on your recovery. While personal disability insurance replaces your income, BOE will pay the rent, utilities, wages, insurance premiums, and equipment leases (to name a few costs) for your business. You apply for a monthly amount of coverage based on your fixed monthly expenses. The premium for the coverage is also a deductible business expense. If you do have a claim, the company will receive this benefit amount, which is taxable but will be directly offset by the expenses you pay for using that cash. Most policies will cover you for a maximum of two years. While you may not be back to work by then, at least you will have some time to consider your next move.
I’ve said it before and I will say it again: Financial planning is all about choice. Ask questions, seek solutions, and choose well.
Jackie, owner and founder of Invested Mama Inc, was raised by the original Invested Mama: a single parent who not only could stretch a dollar for miles, but had a deep respect for money and the freedom it can provide. Jackie has since spent nearly two decades helping individuals and families address their own financial wellness with the same direct and clear approach that was taught to her. She provides a full range of financial planning, insurance, and investment solutions to her clients, utilizing the best resources in the industry. As a financial advisor, she aims to instil a sense of control and peace of mind around money that will empower her clients and keep them moving forward.