Are you properly protected against business risks? In this vital episode, Darren Vardy examines the critical role of insurance in business protection and reveals why many business owners discover their coverage gaps too late. Learn about the essential types of insurance every business should have, understand personal guarantees and director liability, and discover strategies for protecting your family assets when business challenges arise. Darren shares real-world examples of how proper insurance planning can be the difference between recovery and personal financial devastation.

KEY TOPICS COVERED:

• Essential business insurance types and coverage • Personal guarantees and director liability exposure • Key person insurance and business continuity • Professional indemnity and public liability insurance • Director and officer (D&O) insurance • Asset protection strategies for business owners • Insurance considerations during financial distress • How insurance interacts with insolvency proceedings • Protecting family assets from business liabilities

KEY TAKEAWAYS:

✓ Proper insurance coverage is your first line of defense against business failure ✓ Personal guarantees create significant exposure that many directors underestimate ✓ Key person insurance protects your business if critical team members are lost ✓ Director and officer insurance can protect personal assets from liability claims ✓ Insurance planning should be proactive, not reactive to financial distress ✓ Understanding your coverage gaps before crisis hits is essential ✓ Family asset protection requires strategic planning and proper structure

Who Should Listen: Business owners, company directors, lawyers, accountants, and anyone wanting to understand financial distress warning signs.

About the Host:

Darren Vardy - Managing Director of Insolvency Options and Registered Liquidator with over 30 years of experience in business recovery and debt solutions. Darren has helped thousands of businesses and individuals navigate financial distress and find practical solutions to complex problems.

Connect With Us:

• Website: insolvencyoptions.com.au  • Phone: 1800 463 328 • LinkedIn: https://www.linkedin.com/in/darrenvardy/

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Co-host: Anthony Perl

Produced by: Podcasts Done For You

He reveals why proper insurance coverage is your first line of defense against business failure, and explains the types of insurance that business owners often overlook until it's too late. You'll learn about personal guarantees, director liability insurance, key person insurance, and strategies for protecting your family when business challenges arise.

I'm your co-host, Anthony Pearl. Let's dive into unlocking more about insolvency options.

Darren, let's talk a little bit about risk management, and particularly around insurance. Insurance is an important part of any business, but how prepared are people? How much understanding do they have about what they're actually doing and why they're actually doing it?

My philosophy on insurance is that I'm an insolvency practitioner. I have a particular expertise in that field. Business owners, in my view, should seek out an insurance broker to get the right advice on what insurances they need in their in place to cover them for their particular business. A lot of businesses will just go out and get a standard business cover.

They'll go out and get some workers' compensation insurance, which they need for their staff. But depending on the type of business, some businesses might find that they're in the business of providing advice unknowingly, for which they may require a, some form of professional indemnity cover, and in circumstances where they've provided.

Set advice and an issue arises. They may not have any insurance cover, which will cover, uh, any problems that may arise from that advice being given. And I'm not talking sort of professional advice like accountant, lawyers and the like, you know, I'm talking advice, you know, in the construction industry, design, you know.

Builders are doing a design construct. Now, they may have all the insurances in place for the construct, but have they got the appropriate insurances in place for the design component, which is very different from the construction component, but this is why it's important to, to really seek the advice of experts, but IE an insurance broker to really have a look at, drill down onto the different components of your business and determine what the insurance.

Policies are that you require a place to ensure that

And I suppose that's where a lot of people sort of turn a blind eye to it. It

Insurers themselves, and that's another thing that they need to concern themselves with, is that what happens if, uh, you as a business owner are unable to work for a period of more than three months? What happens if an accident happens? Are you covered? What are the contingencies in place in the event of what if

There's no one driving or generating the, the income, particularly when the businesses are small to medium sized enterprises, there is debt owing by the business which needs to get dealt with, and some of that debt the director may have given personal guarantee. So then that will then flow back on the, the family unit and the wealth of the family unit that may or may not exist at that point in time.

You know, whilst. A partner, husband, wife is dealing with the loss of their significant other. They've then gotta deal with all the issues of these business related issues that they may or may not have had any involvement with in the past. So whilst they're looking to time to grieve, they're then being forced to deal with what can be some real financial issues that could have been avoided with an insurance policy being in place.

And, and what are the implications then if they don't have something in place versus what happens if they do have it in place?

Their personal exposure within the business and the liabilities. So, you know, they might take out sufficient cover to enable all their liabilities to be satisfied in the event of an issue. Those liabilities may be, you know, business loans, you know, lease obligations and the like. So there may be an assessment of, well, if.

Everything stopped today and everything was sold, and we are left with a pool of money, but also a bag of liabilities. If there's going to be an expected deficiency between the pool of money and the bag of liabilities, we might make the cover. The value of the cupboards would be the extent to which those liabilities are covered, and that's just the typical example.

And

It's really coming back to that personal cover. In the event of, you know, a terminal illness or death and making sure that the businesses is, he wound down and the business liabilities are covered to ensure that there's no flow back on the personal side of the personal wealth with the spouse or, and, and the like, so.

I

No one likes to think about death or terminal illness, but it happens. And I think more and more now, we've, there's certainly more cases of cancer happening every year. We hear, you know, that I think they say, you know, one in three are touched by cancer. So. With things like that, in my view, these little insurance policies whilst they come at a cost, do provide a real benefit when faced with a health event such as that, and just takes the pressure off, enabling the business to get dealt with and wound down, say in an oddly manner without having that significant detrimental impact back on the family unit.

And people don't necessarily think about, well, I need to have a risk management strategy in case I do go insolvent, because people don't want to think that that is ever a possibility.

But I can assure you that, that the benefits of having things in place far outweigh the detriment of not having things in place. I

It could be an injury, it could be just exhaustion. Any number of different things that can happen. There has to be someone on the bench that can fill in and do that, and yet we don't think of those simple scenarios as far as a business is concerned.

That's, you know, in the event that things do go south in the business, are there some particular items and ideas that people should be thinking of in advance?

There are. A lot of different professional organizations out there where our business can go to get the advice as to what they need to for their business put in place by way of risk management strategies. And depending on the industry, a lot of industry associations will actually provide some really good generic risk management policy documentation for a business to actually start.

Work going through and working through, but as I said, you know, insurance. Planning for the worst is, in my view, key when it comes to that risk management piece. And so business owners, no matter how big the business is, obviously the bigger the business, the larger the risk management policy needs to be.

And you may well have reserves on the bench to be able to bring people in to fulfill certain roles, to assist with certain divisions and the like. But as a small operator, the risk management. Plan may simply be that I run a business, it's a business which is my personal professional dealings, so therefore all the goodwill is me.

And your risk management strategy might simply be an insurance policy that sits there

And on the other hand, oh my God, what do we do? Because there's nothing there.

He had a debit director loan account. There were sufficient funds coming in from the insurance policy to repay that loan account, which enabled me to then go and deal with the company's creditors and. Then the family spouse and the family were left with the balance of the insurance policy to do what they needed to do and get on with working out what life was gonna be like without the head of the family being around.

Whereas if there was no insurance policy in that instance, whilst their equity in the house, we would've been left with a position where he was a co-owner of the house. We would've need to have potentially. Have to have the house sold and then the proceeds to coming to repay that director loan, which would've left the family union in a far worse financial position and potentially out of a home that they lived in for the past 20 so years.

'cause at the end of the day, we are just here to do a process. And we have to follow the process through to the ends. And in circumstances like that, it could have been a whole lot

He'll reveal the critical 21 day deadline that could make you personally liable. For company tax debts and explain the three actions you must consider when you receive A DPN. It's essential knowledge for every company director. For details on how to get in touch with Darren and his team on insolvency challenges, please consult the show notes.

This podcast is produced by my team at podcast done for you.com au. Helping professionals share their expertise through powerful podcast content. If you found value in today's episode, please like, comment, share, and subscribe to IO insolvency options so you never miss an episode. Until next time, remember, there's always a way forward when you know your options.