Are you aware of the many risks surrounding you!? Are you aware of what impacts these risks can have to you, to your family and to your organisation!? How often do we account for such risks while taking decisions, small and big alike? Have you calculated your human life value?

A business owner is well aware of the many risks surrounding him and his organisation such as key person leaving the company, or the key person being disabled or dead, there could be a change in the government order; there could be change in the dynamics etc.

Such risks need to be addressed majorly when the business owner is in the right state of mind itself.

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Challenges are part of everyday life and therefore each decision that the owner takes has an implication on his/her family, the business and the members of the organisation on the whole; i:e; the employees that work day in day out in your organisation. The business owner also has the responsibility towards all the transactions initiated in the business including paying all outstanding amounts to the vendors and other financial commitments.

This isn’t a choice, it’s your responsibility. It’s something that every business owner must ponder upon and decide according to what suits the best for himself/herself.

A prudent business owner is one who’d take into account various risks and try hedging against each risk in order to ensure financial sustainability for the family and for the organisation on the world.

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As the owner of the business or the company, if something were to happen to you, it’s direct financial impact would fall on your family and the organisation too. I’m sure you’d not want to see your organisation going into havoc and your family having to compromise on their lifestyle just because of some untoward incident that left you disabled or even dead. Once you build your company, you become responsible to those working towards its growth too. You need to place in systems and processes that’ll continue functioning even after you leave the organisation.

One of the best ways to hedge against business risks is to cover for human life value for yourself and for the key person or persons in your family and your organisation because each person holds a certain value (insurable interest) in your organisation and their loss is a financial loss for your organisation.

One of the simple ways to calculate the human life value is :

<<vendor commitment + family commitment + Bank OD + employee commitment + the amount you earn every month in your business>>

For example: if you’re earning Rs. 12 lakhs in a year, then you need to protect yourself for your business at least 10x; i:e; Rs. 1.2 crores. Reason being, that’s the kind of inflow your business would require post your death for somebody else to take care of your business. However if you have your liability, then you need to add that too and get the approximate number to secure yourself.

Another way is to purchase term insurance that’s available in the market for protecting your human life value. For example: You own a high class car which you insure with Rs.30,000. If something happens to it, you immediately go ahead and demand a claim from the insurance company. If such is the case then don’t you think that the person who’s sitting inside the car should be insured more than the value of the car itself, at least by 10x the value of car insurance? Under the term insurance if you take a keyman policy or an employer employee policy for all your employees with the insurance company, then the premium paid will be treated as an expense in the company’s books of account. The whole point is to have the adequate cover.

Risks are like unexpected guests and a risk is a risk until it’s not taken care of beforehand. Therefore as long as you cover for possible risks, you’re securing your company also to that extent. Hence cover your financial business risk to the optimum possibility- cover your business goals, liabilities, employee, keyman person and ultimately yourself.

(P.C: Pexels)


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