Regardless of our legal obligation to implement health and safety legislation, it’s in our interests as employers to look after the well-being of our staff. As responsible employers we do everything in our power to protect our employees.
But, have you ever thought about how would you protect your key staff were they never to turn up for work again?
As a key link in your value chain, have you thought about who would handle your client relationships or be that go to guy when something is not working? Would your business survive intact and at what cost? What if that person was you? Just how would you protect your business?
Well perhaps it’s time to stop leaving it all to chance and consider how important life insurance is to your business continuity.
Key Man Insurance is becoming increasingly important to all businesses who have staff who are considered difficult to replace. Key Man Insurance is designed to reduce the impact of losing a key member of staff. The business can use the insurance pay-out to find a replacement or pay debts, investors, employees or neatly wind-up the company.
Who are your key people?
A key person is anyone whose loss would lead to financial hardship for the business. This includes anyone whose skill, knowledge or experience contributes to the financial success of a business either directly or indirectly.
How important are your key personnel
Key personnel can affect profits and their loss, can lead to having to spend time recruiting or training replacements. Business relationships can be adversely affected by the loss of key personnel if they are not there to maintain contacts. Research by Legal and General found that 40% of businesses would actually cease trading within a year due to the loss of key personnel from a small business. Interestingly, in contrast, business leaders grossly underestimate such a loss.
Only 3% thought that death or illness of a critical person would have any effect on their business.
How critical are key people to your business?
The same Legal and General research found 89% of small businesses would cease trading in under a year if a key person were to die or fall critically ill. Considering that 99% of businesses in the UK have under 10 employees and 62% of private sector businesses are sole traders, it’s not surprising that business owners have lots of other priorities. However, leaving aside the business itself, it’s important to put plans in place to protect yourself and your business against this risk.
Considering that 99% of businesses in the UK have under 10 employees and 62% of private sector businesses are sole traders, it’s not surprising that business owners have lots of other priorities. However, leaving aside the business itself, it’s important to put plans in place to protect yourself and your business against this risk.
Extremely critical to a business, is the loss of a person who has guaranteed a loan. Business loan protection helps to mitigate against this risk and will ensure that outstanding overdrafts, loans or commercial mortgages are paid.
So just how will insuring my key personnel help my business?
Business protection can deliver business continuity when someone crucial to your business dies or is diagnosed with a terminal or critical illness. It enables you to continue trading despite the disruption and buys you time to find and train a replacement or buy shares from the deceased partner’s estate.
It can also provide interim assistance if there is a period of time when key personnel are unable to work due to illness or other factors.
Protecting my business when key staff are unable to work
The best way to protect your business from the impact of losing a key member of your staff either to death or illness is to assure your business against it with Key Man Insurance. Not only is relevant life insurance important for key staff, but it is also very cost effective due to the tax relief available. Can you afford to do without your key personnel?
How much will it cost to cover your key personnel?
How much you spend on insuring your key personnel is a decision only you can make.
Shopping around and getting the best rates from several different agents is one way of ensuring the lowest rates. You can ask for term insurance which will give you a lower premium. Beware of insurance companies trying to push for whole life terms which will also have much higher commissions and premiums than is necessary.
Comparing the costs on different insured amounts and the costs on each will help you decide how much insurance you can afford. A guide to making this decision is to think how much your business would require to survive until a replacement person gets up to speed and gets the business back on a firm footing.
The aim is to implement a policy which will address the needs of your business in the short term if tragedy were to strike.
If you need any advice with protecting your business, our professional business support team can help with advice and quotations. Click here to read more information on protecting your team.