nearest Private Practice endorsed Financial Adviser:
·
They have a young family and own a home
worth $1.5 million. Adam wants to expand
his practice and to do this he'll need to raise
some capital. After assessing his options, he
borrows $500,000 from a bank and, as part
of the loan agreement, he signs a guarantee
using the family home as security.
if he dies or becomes totally and
permanently disabled.
to repay the loan will be to sell either the
business or the family home, and both these
options would have significant drawbacks.
price. Selling the family home can present
similar challenges, compounded by Adam's
family having to find somewhere else to live.
could struggle to meet the loan repayments,
particularly if he takes a while to recover or
is unable to return to work.
he take out $500,000 in Life, Total and
Permanent Disability, and Critical
Illness insurance.
repay the loan and extinguish the guarantee.
importance of speaking to a financial adviser
about protecting assets that have been used
to secure business debts in case you (or
another key person) die, become totally and
permanently disabled or suffer a critical illness.
A financial adviser can also address a range
of potential issues and identify other suitable
protection strategies (see Tips & Traps).
cover in line with the changing value of
your debts, as failing to so may lead to
a funding shortfall.
business is run, own an insurance policy
taken out for the purpose of repaying a
debt, the premiums paid by you (or the
entity) will not be tax deductible.
Permanent Disability insurance through
a super fund, you could benefit from
upfront tax concessions generally not
available when insuring outside of super.
cost-effective if you pay level premiums,
increase each year with age.
your business revenue if you (or another
key person) die, become disabled or
suffer a critical illness.
consider establishing a Buy/Sell
agreement funded by insurance. This
is a legal contract between business
owners that helps to facilitate an orderly
transfer of interests in the business if an
owner needs to depart the business for
a range of reasons.
insurance to protect yourself and your
family if something happens to you.